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14 Reasons Why You Get Rejected for a Business Bank Loan

Why You Get Rejected for Business Bank Loans & 7 Ways to Improve Your chances


Do you ever wonder what the secret is to getting a business bank loan?

Bank Secrets

Do you ever feel that the bank is holding something back and there must be some dirty little secret that you’re missing?

Wonder no more. What I’m about to show you are the cold hard facts. 

There are no little secrets. 

We get the frustration and confusion you feel when you get a business loan rejection with no explanation. Applying for a business loan from a bank can be exhausting and stressful. Even though different banks have different standards and requirements for loan applications and conditions, the old adage “CASH IS KING” still rings true.

We’re going to expose 9 keys to getting that coveted bank loan and destroying the myth that there are dirty little secrets. We’ll show you 7 ways to improve your chances.


The Dirty Little Secrets Traditional Banks and Financial Institutions Don’t Want You to Know. 

Dirty Little Secrets Banks Hide from You

The first step is to understand that the traditional bank route is a nightmare. 


Let’s look at the typical bank requirements to get business funding. The average business owner will visit on average three banks or financial institutions and spend close to 30 hours on the loan application process trying to secure a business loan. Think about it for a second. You don’t have any time to take a well-deserved vacation but trying to get a bank loan means you’ll have to take almost one week away from work to get it done.


Why is Getting a Business Bank Loan so Hard?


Now for all the paperwork. Take a look at this list. Is it any wonder why it will take you 30-hours? It can seem quite overwhelming, don’t you agree?

  • R.E. DEED


Did You Get Rejected for a Bank Loan?



Bank Rejects Business Loan



After the worst recession in the early 2000s, since the Great Depression, banks were forced to comply with more challenging rules and regulations. 

The result was a dramatic and painful retreat from business funding. 




Financing options all but dried up for companies generating annual revenue between $200,000 to $20 million. The types of loans necessary to expand or grow your business all but evaporated, and business owners got cancellation notices for their credit lines. 

Banks and credit unions stopped issuing business credit cards, and business lines of credit, invoice financing, and equipment funding all but shut down. Just as things started rebounding and businesses were making a huge comeback, they got blindsided by Covid-19. For many, it is enough for a TKO.

Anxiety and fear persist.

The coronavirus pandemic struck many establishments, from movie theaters, restaurants, nail salons to warehouses and slaughterhouses. 

Essential workers, non-essential workers, social distancing, mandates, masks, and vaccines create ongoing havoc.

Many businesses across the U.S. are closing their doors due to a lack of supplies, employees, and customers. There are programs put in place by the federal government to keep workers employed, but it’s crushing many companies at the end of the day.

The division of haves and have not’s become more pronounced. Big businesses get bigger, and many small business owners lose it all. After exhausting PPP and EIDL loans, many companies seek additional funding to rebound or grow their business.

14 Top Reasons Why You’ll Get Rejected for a Bank Loan


  1. According to a Fed survey, the simplest and most common reason for the rejection is too much debt. High debt is the most common reason small businesses get rejection letters. 
  2. Banks may view you as a higher risk if you have a lot of debt, and the bank evaluates your credit utilization. As a loan applicant, you must exercise caution when taking on new debt and ensure that a strong enough cash flow covers your monthly payments. Think about when you apply for a home mortgage. It’s the same concept, and every mortgage lender will tell you the same thing. Do not apply for any additional credit while your home loan application is under review.
  3.  The owner must meet a specific credit score to qualify for a loan and the best interest rate. You must have good credit. Most lenders prefer a high personal credit score (FICO 720 or higher). You’re probably out of luck if you have a low credit score below 630. Do yourself a favor and before you apply, check with a credit bureau (you get one free report a year), or go to a site like Credit Karma. 
  4. The following reason for rejection includes a bad credit history. As a borrower, you cannot have a late payment. You’ll have a challenge securing the funds if you have a high debt-to-income ratio and unstable employment history. The bank or credit union evaluates your company’s revenue, and many times it’s too low for the desired loan amount. Too frequently, loan denial is because you miss important information or application paperwork.
  5. Lenders may or may not consider a borrower’s criminal history depending on the circumstances. Rejection can reflect a person’s “moral turpitude” and other criminal offenses. In most cases, this includes crimes of violence and financial dishonesty (e.g., burglary, embezzlement). However, prior convictions may not prevent a candidate from being considered.
  6. The quality of an applicant’s earnings or cash flow is another common reason for a business loan applications rejection. Nonrecurring sources of cash like asset sales or unaccounted transfers into your account do not qualify, and making late payments to vendors also hurts your chances. Lenders look for long-term sales that repeat as examples of cash flow quality.
  7. Insufficient collateral and a high debt load are common reasons for loan denials. Assets such as real estate, inventory, and receivables can be used as collateral when trying to get a “secured loan.”. The debt load includes both long-term and short-term debt. While a few banks don’t require collateral for a small business unsecured loan, the vast majority do. More important to lenders than gaining ownership of your collateral is receiving assurances that the loan gets repaid on time with sufficient cash flow.
  8. Obtaining a small business loan for a new entrepreneur can be arduous. You’ve yet to demonstrate the sustainability of your business model, although it necessitates a certain amount of working capital to keep it running. There is no traditional bank loan if you have been in business for less than two years. Most banks require two years’ worth of business and personal tax returns when applying for a loan, so you may need to have been in business for more than two years before applying. Even a well-thought-out business plan may not be enough if your industry has a high failure rate. Restaurants, for example, often have trouble obtaining bank loans as a result of this. Some regulations can have a ripple effect on other industries, making operating there more difficult or expensive. Consequently, banks are sensitive to greater risk. Instead, banks may look to other sectors or tighten their qualification requirements, making it even more difficult for most business owners to obtain financing.
  9. Banks may consider how much of the company’s income is from a small number of customers, businesses, or governments. High-value customers are a better option than doing business with the Sketchy Stu down the street, as long as you’re dealing with well-known companies like Costco. The goal here is to spread out the risk as much as possible. Having a more extensive, loyal customer base is a plus, and doing so will alleviate both the bank’s and your financial concerns.
  10. The size of your company will impact the chances of your approval. Are you a one-person shop, or do you have employees? Is the size of the loan request in line with your ability to increase sales sufficiently enough to repay the loan?
  11. Availability or the size of a personal guarantee might determine whether you qualify. If you are looking to borrow $100,000 but have assets of only $15,000, a lender will be hesitant to give you the loan based on a personal guarantee. 
  12. Economic concerns play a prominent role in whether a lender likes a business or industry. If credit is tight due to poor economic conditions, the availability of loans might be challenging. Think about what Covid did to various companies. Some were deemed essential, others not essential. Then two years later, the essentials all of a sudden became not so essential. Remember that tides constantly go in and out, and sometimes it’s helpful to know when it’s low tide or high tide. 
  13. Insufficient management teams can mean that you don’t have either the personnel or the right personnel to grow and expand your business. Imagine a small manufacturer that gets a large order from a customer. That larger order doesn’t necessarily convey to the lender that it’s no risk. Maybe your facility size and the number of employees are insufficient to fulfill the order. Catch-22? Perhaps or maybe, you need to stairstep your growth to satisfy the bank that you won’t collapse. 
  14. Another reason can be anything else. When your file gets to the credit committee, there can be any number of reasons for the denial. These reasons are outside those listed above that get the “Denied” stamped across the application.

Is there a solution?

Let's Begin!

Due to overburdening federal regulations, banks find it increasingly difficult to use information other than credit scores to assess risk. Because banks don’t use as much information as alternative lenders do when evaluating borrowers, a business loan from a bank can be difficult. 

Alternative or online lenders can consider owners with poor credit, no tangible assets to use as collateral obtaining, or time in business.

What does this mean to the typical small business owner? Only about 14% of small business loan applications submitted to large banks get approvals. Small banks are not much better. Only about 18.5% of the business loan requests are approved, making it challenging for small business owners to get the funding they seek.

Getting a Bank Business Loan: 7 Ways to Improve Your Possibilities

Most businesses try to get their funding from banks to expand their operations. Securing funding at a moment’s notice is a difficult task, and the lack of a cash infusion could have a long-term negative impact on businesses that aren’t prepared ahead of time for a business loan. Here are 7 steps to help improve your chances.

  1. Prepare up-to-date financial statements. If you’re not using accounting software, make this a priority. You’ll need a P&L (Profit and Loss), Balance Sheet, and Accounts Receivable (A/R) and Accounts Payable (A/P) at a minimum. 
  2. Know your cash flow. How much money do you have at the end of the month to pay back a loan?
  3. Grow your sales. Strive for a 10% minimum growth per year. To counter slower sales, figure out how to cut expenses.
  4. Get a handle on your personal and business credit scores. Work on improving both. They can never be too high.
  5. Develop a relationship with lenders. Get someone to believe in you.
  6. Collateral. If you have it, use it. Lenders like the security. Plus, if you’re not confident using it, the lender may also be apprehensive.
  7. Understand the business environment. What are the prevailing winds? Are there factors that are making lenders tighten their belts? These can range from recessions to weather-related to unfavorable industries.

How do I Get a Small Business Loan?


If a bank loan is not an option, all is not lost. There are alternative or online lenders that aggressively seek to help fund companies. 

Many are highly motivated to provide you with the very best service and help you secure financing your business. Companies like Sunwise Capital understand your challenges as an entrepreneur as business owners. 

They know your time is precious, and the last thing you want is an overly aggressive salesperson trying to force an unsuitable loan down your throat. They work with all types of small businesses and offer a range of loan programs to meet all of your business plans.

The paradigm is shifting from “How do you qualify for a business bank loan?” to “where do I get a business loan online?”


How to Obtain Small Business Loans with an Online Lender


The items below are the critical qualifying factors. To get a business loan approval, here is what you need to know to determine whether your business loan application can qualify for the best small business loans:

  • Time in business for at least one year. Startup loans are very challenging. Most online lenders will not consider any company with less than six months of revenue. Banks typically will not look at startup business loans since they require a minimum of two to three years of personal and business tax returns and financial statements.
  • Minimum monthly revenue of ranges from $3,000 to $15,000 or more. Is there something magical about at least $180,000 annual income? Understand that no bank will approve your business loan with little to no revenue. Alternative lenders base their approval on multiple factors, including your cash flow. Strong cash flow ensures that you have enough money for loan repayment at the end of the day. Keeping enough cash in your business account is necessary regardless of whether the payment of your business loan is daily, weekly or monthly.
  • You must be a U.S. citizen (case by case for work visas) with a U.S.-based business. Generally, lenders like to see you have 51% ownership in the company; however, this is not a hard and fast rule. Business owners with lower ownership amounts are ok. You must have a business checking account and an active business registered with your secretary of state.
  • A personal credit score of 525 or better. Can you have lower scores? Yes, however, there need to be other mitigating factors to make up for the score’s weakness, such as time in business, revenue, business credit, and industry.

What factors increase the chances of loan approval? What are the highest approval factors?


  • No bankruptcies or criminal histories. Make sure the bankruptcy is discharged for over one year, as most lenders other than banks will consider your loan application. Most online or alternative lenders also desire at least five monthly deposits, preferably from different clients.
  • Tax liens are ok as long as they are less than $200K and there is an agreement for repayment in place.
  • NSF’s (non-sufficient funds) are generally less than four a month.
  • No-stacking. No bank or typical financial institution will allow the average business to secure more than one bank loan. For more information on this research, “subordination.” Some online lenders will allow for more than one concurrent loan; however, most loan agreements consider stacking to a violation of their terms and conditions. Lastly, the best loan approvals originate when a company has been in business for three years or more.

What Makes Online Small Business Loans Hard to Get?


The following makes it very challenging and, in some cases, even hard to get an approval for your loan.

Business loan rejections increase dramatically when one or more of these items are in your history. Financing your business is almost impossible if you have:

  • No credit history. Credit includes both personal credit and business credit. If you consider applying for a business loan, you should sign up for credit monitoring.
  • An average minimum daily balance of less than $1,000. Most businesses that generate less than $15,000 a month struggle to keep this balance.
  • Business loan defaults are a deal killer—also, a history of taking more than three advances simultaneously or stacking. The strategy of taking as many loans as possible is problematic. While appealing short term, it dramatically reduces your loan options in the future and should be avoided.
  • Open bankruptcies or foreclosures.
  • Negative ledger balances. Keep on top of your business finances.
  • Company revenue is going to a personal checking or savings account. It would help if you kept your business finances separate from your personal finances. You do not want to take a personal loan for the business.

How Easy is it to get a Small Business Loan from Sunwise Capital?


Talk to us if you have special needs like SBA loans (7a loans) or equipment financing.


Our loan application process is fast and easy. To start the process, all we need is:

  • one-page application
  • Soft credit pulls – No impact on your credit score or credit reports.
  • Provide the last three months of your business bank statements
  • Tax returns are not necessary for loan amounts under $100,000
  • There is no application fee, cost, or obligation to apply.
  • 24-hour approvals
  • Same day and next day funding
  • Loan amounts between $10,000 to $2M. Talk to a specialist for a maximum loan amount up to $60M.
  • Easy loan payment options include daily, weekly, and monthly. 


Term Loans – Loan programs from 3 months to 10 years, depending on loan programs. 

  • LOC
  • Higher Working Capital
  • Higher Small Buss Loan / Consolidation Loan
  • SBA RE
  • Debt Restructuring

How About a “No Doc” Business Loan?

Getting approved for a business loan with no income is simple, as long as you qualify! Flexible terms and convenient closings make this program accessible to everyone with a credit rating of 720 or better. Because fewer documents are needed to be eligible for a no-income business loan, the approval process is much faster than for a traditional business loan. 


The Sunwise Capital qualifications are less than those of banks. We’re focused on getting you approved so you can grow your business. Let us know how we can help.


Mark J. Kane, Founder & CEO of Sunwise Capital, is a distinguished entrepreneur with over 16 years in business financing. Beginning as a psychologist, he quickly became a trailblazing Hospital Administrator. Mark has built multiple ventures, notably accelerating a startup to $18M within months. His transition to Sunwise Capital stems from a deep-seated desire to empower business owners with strategic financial solutions. Recognized for his expertise, Mark's leadership at Sunwise Capital reflects his commitment to fostering business growth and success. about the author.

Take Your Business Further With A Loan From Sunwise Capital