A business line of credit can be a useful financial solution to help your small or medium sized enterprise (SME) better manage cash flow and fuel ongoing success.
That’s why your application for a business line of credit being rejected can be discouraging. But it does not mean the end of the line for your funding options.
With ScotPac, there are several SME funding alternatives to help improve cash flow and strengthen your business’s market position.
In this guide, we will help businesses who were not approved for a line of credit discover what they should do next.
Why was your business line of credit application not approved?
There are distinct reasons why an SME may not be approved for a business line of credit.
Does line of credit rejection mean your business is not sustainable?
No, it does not.
A rejection does not always mean your business is not viable commercially. Rather a rejected application can reflect more on the risk parameters of the lender than the reality or future of your business.
What are the common reasons for a business being rejected?
Some of the most common reasons can include:
- Limited or insufficient trading history, especially for new businesses and startups
- Low annual turnover
- Insufficient collateral (or personal guarantees) for use as security for a secured line of credit.
- High credit utilisation or other existing debts.
- Inconsistent cash flow
- Poor payment performance
How do you know why your application was not approved?
To make the best financial decision moving forwards it is important to review the financial institution’s or lender’s feedback carefully.
This can help you work out what needs to be improved, whether it’s better cash flow management or strong financial documentation, to ensure higher chances of approval for your next application.
How can you improve the likelihood of not being rejected?
Limited Trading History or Low Annual Turnover
The best way to tackle this reason for rejection is to:
- Focus on strengthening your financial track record for the next 6 to 12 months
- Build revenue streams that are as steady as possible
- Keep your financial statements up to date
- Record growth trends, new contracts and improvements in profitability
Lack of Collateral or Personal Guarantees
If your lack of assets for security is a problem, you have a few avenues to explore:
- Consider unsecured forms of business finance
- Consider alternative business solutions, such as Invoice Finance
- Work with a professional to improve your personal and business balance sheet to identify under-utilised assets
High Credit Utilisation and Other Debt
If your business already has a lot of debt, here are some options:
- Focus on reducing the balance
- Consolidate your debt as much as you can
- Prioritise the highest interest facilities
- Make sure you make repayments on time
Cash Flow and Payment Performance Problems
If this is your sticking point you might need to employ some of the following tips:
- Tighten your credit control processes
- Focus on improving your cash flow management
- Shorten the payment terms offered to customers and clients
- Follow up on overdue invoices
- Consider forms of finance that can help improve cash flow, such as Invoice Finance
What are ScotPac’s SME funding alternatives to a line of credit?
For over 35 years, the team here at ScotPac has been offering SMEs a range of business finance solutions to help them grow and better manage working capital.
We specialise in customising fast and flexible funding solutions to suit unique cash flow needs, even when some traditional credit line options are not available.
If your business line of credit application was rejected, here are some alternative options:
- Invoice Finance
- Trade Finance
- Asset Finance
- Business Loans
What is Invoice Finance?
Invoice Finance allows you to turn your unpaid invoices into immediately accessible working capital.
Invoice Finance allows you to unlock the cash tied up in your accounts receivable instead of having to wait the 30, 60, or 90 days for customers to pay.
Find out more about how Invoice Finance could help you today.
What is Trade Finance?
Trade Finance helps importers and exporters bridge the funding gaps inherent to domestic or international trade.
For growing SMEs, trade finance can be critical in covering supplier payments before the goods are sold. It provides upfront buying power so you can meet customer demand without putting pressure on your cash flow.
Explore how Trade Finance can boost your purchasing power.
What is Asset Finance?
Asset Finance helps SMEs secure funding to purchase new equipment and other assets, such as vehicles.
For SMEs needing a financial solution that eases up cash flow to fund vehicles, machinery, or technology asset finance can help. It is designed to help you spread the cost over time, thus improving your ability to manage cash flow, but without draining your reserves.
Enquire about Asset Finance with our team today.
What is a Business Loan?
More traditional finance solutions, such as business loans, provide SMEs with fast access to lump-sum working capital.
At ScotPac, we offer secured business loans so even companies who were not approved for a line of credit can access our flexible one-off capital boosts. As a non-traditional, non-banking lender, our approval processes are typically faster and more flexible than other institutions in the market.
If you would like to find out more about Business Loans, speak with a lending specialist today.
Need a funding solution after a rejected Business Line of Credit application?
When the banks say no, give ScotPac a go.
Whether your last Business Line of Credit application was not approved or you just want to explore SME funding alternatives, make sure to speak to Australia’s leading non-bank lender: ScotPac.
We currently support more than 9,300 businesses and our lending specialists would love to help you too. Contact a ScotPac team member today to learn more.