Have you just received a loan application rejection letter?
You're not alone. Thousands of entrepreneurs experience that. You might feel as if the opportunity of running your own business is lost to you now, but that's not true.
Here are some tips to help you deal with loan application rejection and 4 ideas for jump-starting your business in a different, more creative way.
1. Realize that rejection is common
Even if the fact might not bring you that much comfort when the wound is still open, you should know it: a relatively large percentage of prospective business owners gets rejected.
You might feel a sense of despair, but many successful business owners experienced failure at the onset of their activity.
That's why your first step should be reviewing your business plan for any weak areas that might make your business less creditworthy.
2. Check your business carefully
If your eyes are set on a loan as a means of financing your idea, you should learn as much as you can from that rejection.
How do you improve your future chances of qualifying for a loan? By understanding the main reasons behind the rejection.
When applying for a loan, you can bet that your personal and business credit history is reviewed for credit worthiness. If you or your business have poor credit history or no credit history at all, the chances that your application gets rejected are higher.
Start working on your credit score. Have a look at your credit report to make sure that all information is correct. Your next step is to pay down debt on time and stay below your available credit spending limits.
3. Develop a smart plan
Another reason behind your rejection could be how you articulated your business idea.
A good loan application needs to include a business plan. How else will the lender know how you plan to use your financing and decide whether your goals are achievable?
Develop a solid business plan to convince the lender that you've got full knowledge of the market and competition, but also know how to calculate risk, and decide on a projected timeline for your business. That's how you demonstrate your business potential.
Your plan should feature your business vision, detailed business model, marketing strategy, and a forecast of your earning potential. And that's just the first step.
4. Look for alternative sources of funding
New entrepreneurs with amazing business ideas might find it troublesome to secure a loan or attract an angel investor.
That's why they need to get creative. Here are 4 alternative ways for funding your business.
In peer-to-peer lending, a group of people unite to lend money to each other. That type of funding isn't anything new – small business groups or communities supporting each other have been around for a while. If you know a successful entrepreneur who is willing to fund similar ideas, reach out to them and check whether your idea could become their next investment.
If you think your idea might appeal to people, why not start a crowdfunding campaign? If a large number of people invested a small amount each in your idea, you could make it into reality. This approach is becoming more popular with each year, giving birth to some serious businesses.
Private companies and non-profits sometimes offer small loans to promote entrepreneurship among people who don't qualify for traditional financing.
Instead of taking your rejection personally and drowning in despair, think of an alternative approach to funding your business. Being turned down for a loan means that you need to look for other options. Treat it as a challenge that testifies to your entrepreneurial success.