“Dear BusinessMoney.broker,
Why was my business loan declined by my bank? I don’t understand because I have been a loyal customer in good standing for several years?”
Most banks decline business-loan or equipment-lease applications for the same handful of underwriting red flags. The data show that large banks approve only ~15 % of small-business requests, while small banks are slightly better at ~21 % . Below are the top reasons—and the quick fixes for each.
| Reason | Why it matters | Typical bank threshold | What you can do |
|---|---|---|---|
| 1. Low credit score | Signals high default risk | Personal ≥ 660, Business ≥ 650 | Pull reports, fix errors, pay on time, use credit-building products |
| 2. Weak or inconsistent cash flow | Bank doubts you can service new debt | DSCR ≥ 1.25× (net cash ÷ debt payments) | Tighten receivables, cut non-essential costs, produce monthly cash-flow statements |
| 3. Insufficient collateral / personal guarantee | No back-up source of repayment | Loan-to-value ≤ 70-80 % on pledged assets | Offer additional collateral, accept SBA 7(a) or unsecured alternatives |
| 4. Short or spotty operating history | No proven track record | ≥ 2 years of profitable tax returns | Strengthen interim financials, seek equipment-finance specialists or micro-loans |
| 5. High-risk industry | Banks fear sector volatility | Restaurants, construction, cannabis, etc. | Approach lenders that focus on your niche or use alternative lenders |
| 6. Excessive existing debt or high credit-utilization | Looks over-leveraged | Revolving balances < 30 % of limits | Pay down balances, re-amortize term loans, consolidate to free capacity |
| 7. Incomplete or sloppy loan package | Underwriters can’t make a decision | All schedules, tax returns, projections, resumes, equipment invoices | Create a checklist, have your accountant review before submission |
Key takeaway: banks want to see steady cash flow, good credit, adequate collateral, and a clear repayment plan. If one or more of these pillars is missing, the application is usually declined—regardless of whether it’s a loan or an equipment lease.
10 proven ways to raise your approval odds for a business loan or equipment lease
| What to fix | Why lenders care | Quick action plan |
|---|---|---|
| 1. Credit scores | Personal ≥ 660, Business ≥ 650 is the common floor | Pull free reports from all three bureaus; dispute errors; pay down revolving balances below 30 % |
| 2. Cash-flow cushion | Lenders want Debt-Service-Coverage ≥ 1.25× | Run 12-month forward cash-flow; cut non-essential spend; speed up receivables with 2/10 Net-30 terms |
| 3. Up-to-date financials | Shows you can service new debt | Prepare last 3 years tax returns, YTD P&L, balance sheet, and 24-month projections in one PDF |
| 4. Collateral & guarantees | Reduces lender’s loss if you default | List every asset (equipment, AR, property) and its current market value; be ready to pledge or add a co-signer |
| 5. Exact loan purpose & amount | “I need $125 k for two CNC machines that will raise monthly revenue by $18 k” beats vague requests | Attach supplier quotes or invoices to the application |
| 6. Business plan | Demonstrates market demand and repayment path | 2-pager is fine: problem, solution, market size, team, 3-year forecasts |
| 7. Existing-bank relationship | Familiarity lowers perceived risk | Open (or move) your operating account to the bank 3–6 months before applying |
| 8. SBA or fintech back-up | Banks decline 70–80 % of requests; SBA guarantees up to 85 %, fintechs use real-time sales data | Pre-qualify with SBA Lender Match or revenue-based lenders as a parallel path |
| 9. Timing | Apply when revenue is trending up, not when cash is tight | Lenders view growth as lower risk |
| 10. Clean application | Missing docs or math errors trigger instant declines | Use a checklist: tax returns, bank statements, driver’s license, debt schedule, use-of-funds letter; have your CPA review |
One-sentence takeaway:
Show lenders stable cash flow, strong credit, adequate collateral, and a crystal-clear plan—and line up an SBA or alternative-lender option as a safety net.
Better yet, get your free Business Credit Success Scan™ and let our platform do the work for you. Use the same tools that lenders use when they underwrite your business loan. See exactly what lenders see when they look at your business. Find out what your personal and business scores are without negative affect. Immediately get approved for Business Funding. Get a simple customized step-by-step plan with virtual coaching for your business to become “bankable” as fast as possible, thus allowing access to premium rates and terms. The time is NOW to invest in your business. Why? Because if investing in your Business Credit for funding does not provide the greatest ROI of all, then you need to find a new business.
BusinessMoney.broker 