One of the essential components for SMEs to grow and thrive is financing, but this is not always granted; in these cases, steps must be made to ascertain what went wrong and what can be done.
According to ENAFIN data, one of the things that hinders business growth the most is a lack of funding. Due to this, they may struggle to remain profitable in the future, or in the worst scenario, they may have to shut down. It is crucial to understand what to do in the event that funding and capital sources for SMEs are rejected.
If the SME loan was denied, there are five things to do:
1. Determine the causes of the rejection.
Typically, a financial institution will provide an explanation in writing for any decisions not to provide finance. It is crucial that you pay attention to this since it will serve as a guide for what you should focus on in order to prevent your application from being denied on another occasion.
2. Take a look at your credit score
Check the credit score that your company now has and make use of the data to your benefit. There can be unpaid debts or payments you have missed in the past.
3. Be patient
If you had a business loan rejected, don’t immediately start looking for additional sources of capital and financing for SMEs because it’s likely that they will all point out the same issue, which won’t help you advance and might even harm your company’s reputation by making it seem like a hopeless venture with significant issues and a risk.
The best course of action after being denied a business loan is to wait, complete the previous two tasks, and take the necessary time to make the required adjustments so that when you return in a few months, you will have everything ready.
4. SME loan or credit?
Determine which product best suits you by understanding the differences between the two.
A loan is when you have immediate access to a certain amount of money and an established term to repay it with interest.
A credit is when you have access to a specific (limited) amount based on your needs, and you only pay for what you really use. The interest is greater and the terms are shorter.
5. Examine different financing options
There are financial alternatives to traditional banking that are more accommodating in terms of requirements, such as the following:
Incubators: For a project that is just getting started and does not have the required amount of operating time.
Crowdfunding: Through online loans, a number of little-known investors provide cash for microbusinesses in modest sums.
SOFOMES: They make it simpler to provide loans to companies that are typically turned down by other institutions.
Merchant Cash Advance (MCA): it is a simple, immediate and flexible type of financing, where an SME is quickly given the amount of money it requires, and it pays off that debt with a percentage of its sales, plus interest. The more it is sold, the faster the debt is settled, and if not, there is no rush, this financial product advances at the pace of the business.
The MCA is an attractive way to access funds, without committing your own resources and without stopping earning. With Pymes Capital you can obtain it comfortably, since the platform allows you to request loans online. Consider this option to grow your project.