What to do if Your Small Business Loan Have Been Denied

Best Small Business Loans

For an entrepreneur, nothing is more discouraging than witnessing some obstacles to your small business. Foremost, it becomes quite halting if your lender makes a decision against your favor. You might take it as a rejection for your small business loan application. In fact, puzzling thoughts can make it more perplexing for you to come up with an idea. Additionally, it leads you to arise question whether your business plan can come to an accomplishment or not. However, you do not have to worry at all.

There are many cases where they have got success regarding the matter even after the first rejection. The main concern is why your application failed. So, before you make your other move, make sure you have brought improvisations. Well, we are talking about the improvisation regarding credit and financial standing. 

Well, you should not be taking this as a failure. Your pursuit of the success of your small business can face a few denials including this one. So, for this, we have come up with some helpful tips for you. After going through the article, you might not face the same thing.

Know the reason for denial

You have got all of your hope for another try even if you face a rejection for the first time. As a matter of fact, most of the business owners do want denial so that they can apply for the second time. However, before this, you must ask for the reason for the denial. 


It might be the want for submitting more collateral. The debt to income ratio might be one of the reasons for the rejection. Therefore, you can hope for getting the red flags for the decline of your application.


The time you get the idea of what the lender was looking for, you must wait until your application meets the standards. After that, you can begin with the process again. In this way, you can get more chances for approval. 

Improving your credit score can help

Are you aware of the credit score of your business? Additionally, along with the personal credit scores, the lender evaluates the credit score of your business. It is able to provide a clear insight into your finances. 

Hence, we highly recommend you to improve your credit score. You must not only focus on your personal but also your business credit score. 

Find another lender

In case if the bank rejects your small vusiness loan application, finding a lender can bring fruitful results. You can find a lot of them online who show their keen interest in working with small businesses and startups. You can even get better options that suits the best for your business. 


Look for a different option for financing

Looking for a term loan might not be that satisfying if your business struggles with working capital. You might find your lender showing interest in providing you with revolving credit. Also, you will the lines of credit easier for qualifying as we compare it to the term loans


In fact, you can find some loan products easily obtainable. But, be sure of what options can make the best out of your efforts. 

Find an alternative way

In case you are not able to get the funding from an institution, you can search for some angel investors. Well, you cannot always expect outside cash from financing institutes and lenders. You can consider alternative ways like asking for a loan from your wealthy friends as well as your family. In fact, you can be trustworthy to them so they will rely on you. 

Just take a break

Sometimes, it is better to take a break. So, if you face denial, wait until the moment comes when your business plan is ready. In case if your sales went down, or you got a credit score that is below satisfactory, you must be focusing on improving the numbers. 

Undoubtedly, there is a need for finances, but if you take a break and work on the things, you will be getting positive results.


So, these are some of the most important tips that you must adopt for getting approval for your small business loan application. 

What is a Short term Personal loan?

short term personal loan

A loan is basically an amount of money that a person borrows from any source for a particular period of time. The person then pays back the amount along with the required interest amount. The definition of short-term loans is pretty clear from the name itself. A ‘short term loan’ is basically a loan that you need to pay back within a short tenure. The general tenure for a short term personal loan is one year. Also, often the amount of money that you borrow in terms of short term personal is relatively smaller.

In other words, a short term personal loan is an amount that you would usually opt for during an emergency.

Some of the most important information that you need to have about a ‘short-term personal loan are:

  • These are usually small amounts of money.
  • The payback tenure for these loans is generally short.
  • The approval time for these loans is also shorter than other types of loans.
  • Generally taken during an emergency
  • Need a good credit-score
  • These loans usually have higher rates of interest.

There are various reasons why you must prefer opting for a short term personal loan rather than a normal loan. The reasons are:

  1. You can expect to get the approval of your loan within one to two business days. Generally, the loan approval time is longer and may also require a lot of paperwork. But a short term personal loan is relatively easier to avail.
  2. You can use the money that borrows as a short term personal loan for various purposes. It can be an emergency purpose like a car repair or any other unexpected emergency of money.
  3. You get the money in your hand within a blink. Right after you receive the approval of the loan, the bank or the source will transfer the whole amount to your bank account.
  4. Short term personal loan may offer you a flexible tenure of repayment. You may choose to repay the amount weekly or bi-weekly.
  5. Usually, the short term personal loans are unsecured types of loans. That means that you do not need to put any asset at risk and you will be getting a loan amount without any kind of collateral.
  6. If you have a good credit history, you can get a loan for a pretty lower rate of interest. But in case of a short term personal loan, it is important to have a good credit history.
  7. With a good score, you can get higher borrowing limits. This will depend on your existing credit history and your existing debts. If your credit score is good, you can get higher borrowing amounts.


Due to the above reasons, short term personal loans are very popular these days. But, one thing that you must keep in mind is that if you have a bad credit history, the bank might refuse to give you a loan on lower interest rates.

Can a short-term personal loan be taken with a lesser credit scorer?

When it comes to taking a loan, the most important question that runs in a person’s mind is eligibility. He or she often thinks of whether he or she will be eligible for the loan. The one potential factor that determines one’s eligibility for a loan is the ‘credit score’. But, usually, the concern is with those who don’t have a good credit score. One may wonder whether if he can take a short-term personal loan with a poor credit history.

For that, first, it is important to know what is a credit score?

Credit score:

The credit score is basically the number that represents the amount of risk that usually the lender of the loan takes. When someone borrows money from him he refers to a number called credit score to check his eligibility for the loan. This refers to a measure to indicate the risk factor of the borrower.

It is basically a number that indicates how much creditworthy a borrower is.

Whether you can take a short term loan with a bad credit score:

If you have a bad credit history, it is still possible for your take a short-term personal loan. It is of vital importance that you must try to improve your credit scores first. But, if it is an emergency and you have no way other than applying for the loan with a poor credit history, you might have to compensate on the rates of interest. Usually, the rate of interest that you get on a short term personal loan depends on your credit score. If you have a good credit score, you can avail the loan at suitable rates of interest.

But, with a bad credit history, you may need to pay a considerably higher interest rate. But, there are some agencies out there who might allow you a short term personal loan with a bad credit history as well. They may also give you the loan at a suitable range of interest. You have to do research about the companies that allow such loans.

What is short term loan and types of short term loans in India:

Short term loans are the types of loans that you borrow from a certain source. This has a relatively shorter repayment period, say 12 months or less. Various businesses, entrepreneurs, individuals, etc. can avail of the Short term loans in India to meet various immediate requirements. You can take these types of loans in order to support a temporary personal or business capital need. Short term loans are usually not secured loans and hence these types of loans usually do not require any collateral. The name of the Short term loans is such because of the fact that they need to be quickly paid off. In most of the cases out there, y.

In India, there are many short term finance and the various types of short term loans include:

1.   Merchant cash advances

This is a type of short term loan, which is actually a cash advance but one that still works like a loan. Thus, the lender loans the amount as required by the borrower of the amount. The borrower then repays the loan by allowing the lender to access the credit facility of the borrower.

 2. Lines of credit:

A line of credit is more or less like using a business credit card. After setting the limit of the credit, business then can tap into the line of credit as needed. It makes monthly installments payments against the amount that has been borrowed. That is why the monthly payment due will vary according to the amount of the line of credit that has been accessed.

2.   Payday loans

These loans are the emergency short term loans and are comparatively easy to avail. There are many such short term loan sources and even the high street lenders also offer them. The drawback of payday loans is that you need to pay the entire amount of loan, along with the interest, in one lump sum when the payday of the borrower arrives. The lenders do the repayment by taking out the amount from the bank account of the borrower, using the continuous payment authority.

3.   Online or installment loans:

Where every procedure is online, it becomes relatively easier to get the short term loan. Starting from application to the loan approval, the internet makes it smooth and simple. Within a few minutes of getting the approval for the loan, you will get the amount in your bank account.

4.   Invoice financing:

You can avail of these types of loans by using the accounts receivable of the business, unpaid invoices by the customers. The lender loans the money and charges the interest based on the number of weeks that invoices remain outstanding. After the payment, the lender will charge the interest before returning due to the borrower.

Eligibility criteria for short term finance and the documents required for it

The loans are essentially provided for a short tenure of less than or equal to one year is called short term loans. These are usually one time loans. This can come handy and useful if you are not able to obtain a certain credit amount from a bank for a longer tenure loan. In the case of short term loans in India, the interest is payable on the principle advance amount. The repayment tenures for short term finance are shorter than other types of loans. These loans are also available to a number of customers and business. There are a number of short term loan sources, and many private finance companies or banks may provide such loans.

If you want to avail of a short term loan, you must go through the below points. These will help you know what criteria you require to apply for such loans:

The eligibility criteria for applying for short term finance are:
  1. You must be a resident of India.
  2. For a short term loan, you must be either a salaried employee or a self-employed business or individual.
  3. You need to be above 18 years of age.
  4. Also, you must have a savings bank account.
  5. You must earn an income of over Rs.15000.
  6. Also, if you are an employee you should have work experience of at least 2 years.
  7. But, if you are a business owner, your business should be older than 1 year.

So, these are the necessary eligibility criteria for applying for a short term loan. After meeting the eligibility criteria, the next thing that strikes your mind is what documents you need to apply for a loan.

The documents required for applying for a short-term loan are as follows: 
  1. PAN Card is mandatory for applying for a loan.
  2. Proof of Income: This may include Salary slips for the most recent 3 months 
  3. Residence proof: Also, you need some Rental agreements, Passport, Landline bill, Post-paid mobile bill, Bank statement 
  4. A valid Proof of Identity: You have to show an identity proof like Driver’s license, Aadhaar, Voter ID, Passport 
  5. Proof of Age: Proof of age is necessary, like Driver’s license, PAN card, Passport 
  6. Bank statements for the last 6 months 
  7. Proof of Employment: You can showcase your offer letter, Form 16, Relieving letter as proof of employment.

Other than that, you might also require Passport-size photographs for some necessary documentation.

There are various advantages of short term loans. Some of the biggest advantages of short term loans are that they are disbursed pretty quickly. Also, most of the lenders who short term loans allow the applicants to submit the documents through various online channels. Apart from that, the short term loans are customizable since the borrowers can opt for a loan amount of their choice. They can go for tenure as per the requirements (not exceeding 1 year).

Short term loans: Classifications and definitions

Short Term Loans as a friend for a crisis:

Many times in your life you may feel the dire need of money and in such situations, there is no substitute for short term loans in India. These loans can give a temporary boost that can rescue you from a bad situation. Whether the borrower is an individual or a business organization, the lender can be a bank or a financial institution

Short term loans in India have the capacity to meet your needs and you can make payments by installments. India is a country that has middle-income families. The short term finance is much popular in India due to this reason. The maximum time limit for repaying is 2 years and that is why this is the popular choice of loan for a crisis. 

Let us give a quick snippet of the types of short term loans that you can acquire.

Personal loans:

You never know when a need arrives where you have to spend a good amount of money. Education, a wedding, a foreign trip, home renovation or even helping a friend, personal loans are a perfect solution for these needs. Personal loans can save you in emergency situations. These loans are not secured loans. It means the lender won’t have anything to auction if you fail to repay the amount.  This is the only loan that is not secured and thus different from other short term loans. 

Trade credit:

Trade credit is probably the most affordable interest-free loan available in the market. In this type of loan, the lender gives a time limit to repay the amount without incurring any interest. You can extend trade credit for 30 days. However, if you want then you can opt for a longer tenor to suit your plan easily. 

Bridge loans:

Bridge loans can help you get through the time until you get a bigger value of the loan. For example, you want to buy a new car but don’t have a sufficient amount because you haven’t sold off the old one yet. While you are waiting for the sold off of the old car, you may avail of a bridge loan to buy the new one. This will help you to stop spending extra money if the price of the new car goes up.

Bank overdraft:

You may utilize this loan if you have a current amount. You can draw an amount within the overdraft limit. Overdraft is helpful when you need money urgently but don’t have a sufficient amount.  However, you need to be careful as it could incur extra charges. 

Demand loans:

You can take this loan as per your demand and financial crisis. You can put your insurance policies as security to avail of this loan. The lenders are eligible to decide the amount that can be available on demand.

As a quick summary, we can add that short term loans are fast with very minimum document requirements, the disbursal of the loan amount is fast too and collateral is not required. The repayment process of short term loans is flexible so you can avail of them at any time to meet your needs.  


The personification of various short-term loans, cash advance loans are generally short term finances. These have terms that average a week or two but extend up to three months in some cases. Since the amount of loan and lengths are small, with less built-in interest profit than longer-term loans, short-term cash advance loans tend to charge much higher interest rates. This charges the rates often in the form of a flat fee due at the time you repay your loan.

But, if you think that you are suffering from bad credit, you may automatically think that you cannot receive a loan. Or the lender might reject you for having a bad credit history. At Short Term Loans, some short term loan sources go against the grain, giving you available options to get the cash you need easily, no matter what your credit looks like. Such financial institutes have a bad credit short term loan program which is a process that allows you to obtain a loan.

How to apply for a short term loan with bad credit history?

First of all, it is important for you to know that if you have bad credit. The financial institutes will not prevent you from getting the fast cash loan that you may need immediately. Often, the online loan application process is seamless and efficient. There are many financial institutes that grant loans for bad credit history. It will make the experience pain-free and straightforward. In order to receive short term loans for bad credit, you have to follow three simple steps:

Apply, get approved, and receive the cash.

  • Application: When you fill out an application form, you must provide a few simple pieces of information. These pieces of information can include your current employment information, your income, and your bank account information.
  • Approval: For short term loans in India, you will not have to wait for days or even weeks. It is going to be a quick approval process. Instead, you will get an instant answer regarding the approval and for how much.
  • Receive Your Cash: Once the lender approves your application, the bank or the lender will deposit the money. You will get the money directly into your account. You will receive the money within a few moments of approval, allowing you to handle your expenses. Then, you can then repay your loan the next time you are paid.

Make sure to research well about the type of financial institutions that you choose for your loan.

The Short term loan with no credit checks:

Any kind of loan refers to a type of amount borrowed by a bank or any financial institutions to an individual at any particular interest rate. There are various types of loans that many financial institutes grant on the basis of the credit history of the borrower or for any collateral. Then, there is a term called “no credit check” loan. This type of loan makes it possible for people with a bad history to avail loans.

In other words, the short term loan with no credit check loans requires no credit check whatsoever. This kind of loan is the best for individuals who have a bad credit history. Some individuals who are not properly sure about their credit histories can also apply for such loans. The loan is much different than the secured and unsecured loans. For no credit check loans, the interest rates are typically higher as compared to the interest rate of the normal loans.

How does it work?

There are many short term loan sources that allow you to take the short term loan with no credit check. You can apply for short term loans with no credit check if you have a bad credit history or if you are unsure of your credit history. In such types of short term loans, the lender grants the loan with no necessity for a credit check but at a relatively higher cost. Most of the lenders out there, just require proof of income in order to grant a no credit check short term loans in India.

Features of no credit check short term loans:

Down below are the features of no credit check loans:

  • No credit check loan is often granted regardless of one’s credit history.
  • Also, you can avail quick loan approval.
  • These loans have usually a higher interest rate.
  • No credit check loans offer a flexible tenure period.
  • Also, these are available for higher loan amounts.

Benefits of no credit check short term loans:

Down below are the various benefits of no check credit loans:

  • No need to have a good credit history
  • You can expect a quick approval
  • Also, Can take a higher loan amount
  • These offer varied tenure periods
  • Less documentation and paperwork
  • Also, No need to place a collateral
  • No risk of possession of an asset
  • Fixed interest rates

No credit check loan comes with various advantages and disadvantages. You should choose the tenure and the lender wisely in order to apply for such loans.

(Short term loan in India) from banks vs. private lenders: Pros and cons

A common question that arises whenever you want to avail of Short term loan in India is, “Which one is better? Banks or private lenders?” Each one has its own pros and cons. Let us give you a quick idea about the advantages and disadvantages of both for short term finance. However, first, you need to know what a short term loan is. 

These loans are capable to meet your needs if you are not able to acquire credit from banks for more than 1 year. Short term loan in India can provide you a short tenure for less than one year. They have easy repayment process and are flexible. Short term loans interest rates are normally lower. 

Now, every business owner wants their short term loan sources to be a bank whenever they need a business loan or a short term loan. You may want to ask, why? Is it only because banks offer lower interest rates? Why do banks offer lower rates even? 

Here are the reasons why banks offer lower interest rates:

Banks have a lower cost of funds than private lenders. Depositors help the banks while keeping large amounts of money in their accounts. Thus, banks have easy access to funds. 

Banks have access to federal funds. The federal funds rate is currently 2.5%, which is very cheap considering the past rates. 

Why can’t the private Lenders give lower interest rates? 

Short term loan sources for private lenders are other banks who lend the funds at higher rates than what it costs them to acquire the fund. To summarize this, a private lender’s cost of acquiring funds gets passed on in their loan rates. 

Short term loans from banks vs. private lenders: A bipartite situation 

The grass is not always greener on the other side. Banks may give you a lower interest rate but short term loans from a bank are hard to get. They have strict regulations that bar them from lending money to any new or small or growing business or individual. Private lenders, on the other hand, have no such restrictions or regulations to lend money to anyone. They don’t have any alternative ways to generate revenues even. 

Banks make money easily while giving loans. Their main focus is beating their competitors, i.e. the private lenders. Suppose the private lender that you have chosen is giving you the money at 11% interest. All that is a bank has to do to turn your attention towards them is to charge 10.5%. They can win the match with that only. So, when you are thinking that you did a good job choosing the bank, you may never think that the amount that you are paying as the interest is only a bit less than the private lender.

Bank loans are hard to get even with lower interest rates because of their restrictions. Loans from private lenders are easy to get with higher interest rates. 

The conclusion:

However, if we go back to the original question, which one is better? The answer is, which one is easier to get. If you qualify for a bank loan then you are lucky. However, if not then you need to grow your business to that level where banks can easily lend you the amount. In the meantime, if you are eligible to apply for short term loans then it is better to avail of that rather than losing your business altogether. 

So, whenever you are asking for a short term loan or a business loan, consider the one that you are getting the maximum profit from or the one that you are getting approved by. It really depends on only you which one is better, banks or the private lenders. 


Various financial institutions generally extend Short term loans for a period of 1-2 years. These types of loans are mostly unsecured. This means that you do not have to pledge collateral as security to avail of them. Though you can redeem the funds quickly in these types of loans, the reason why they are called “short-term” is the associated repayment tenor.  You need to be paying off these loans in full within a period of 6 to 18 months. The short term loan interest rates may vary in accordance with different factors. Different institutes allow these loans at interest rates. But, before applying for a short term loan, you must be aware of the short term loan interest rates of the financial institute.

What is the short term loan interest?

The APR for short term loans is usually higher than normal bank financing. On average, the short term loans have an APR of around 400%. And, the APR generally ranges from about 390 to 780 percent. As a matter of fact, for personal loans and credit cards with the standard banks, the APR is typically much lower. For instance, the national average APR for credit cards is around 15%.

How much will my interest rate be?

The short term loan interest rates will depend upon various factors. It will depend on how much you are willing to borrow. and by what time period you are going to repay the amount.

short term loan interest rates

Source: https://data.oecd.org/interest/short-term-interest-rates.htm

Moreover, short-term interest rates are generally averages of daily rates, measured as a percentage. Short-term interest rates are based on three-month money market rates where available. As a matter of fact, the typical standard names are “money market rate” and “treasury bill rate”.

If you are going to apply for short term finance, you need to consider the following alternatives before opting for a short-term loan:

  • Local resources: different Government agencies, various non -profits and local charities often offer free financial services. And, it can help with foods, utilities and rent for those in need.
  • Payment extensions. You can talk with your bill providers about a longer payment plan or extension. You can contact them on the due date if you are behind on payments.
  • Side jobs. The digital marketplace offers the ability to sell unwanted items more easily. They also enable us to sign up for food delivery or drive for rideshare services.

You must know all the nooks and corners about the particular financial institutes from which you are applying for the loan.