Didn’t Get a Small Business Loan? Here’s What You Need to Do

Just when you thought you could breathe a sigh of relief, your application for the SBA Economic Injury Disaster Loan (EIDL) gets denied.

Unfortunately, this is the new reality for many small business owners across the United States. They’re fighting to survive as local governments enforce restrictions and the public stays home. Even when officials lift restrictions, small business owners will face a severely damaged economy, where people are less likely to spend their hard-earned cash.

Thankfully, the government created the SBA Economic Injury Disaster Loan to help many small businesses survive during this difficult time. But what happens if your loan application gets denied? Is there anything else you can do?

There is still hope. Here are 7 critical steps you may be able to take now.

Step 1: Ask your lender why your loan was denied.

It can’t hurt. After submitting your application, a loan officer should have contacted you to review your eligibility. This person should also tell you why your small business loan was denied. A few common reasons are:

  • Your business is still new.
  • You have a low credit score, and it concerns your lender.
  • You don’t have enough collateral.
  • You’re having trouble proving that your business was impacted by COVID-19.

Once you know why your loan was denied, you’ll better understand the best path forward.

Step 2: Make sure your documents are correct.

Paperwork can be overwhelming, especially when you’re applying for a loan. If you were recently denied, go back and double check your documentation. Just one missing detail could be enough to put your business in the denial pile.

Make sure you have correct information on:

  • A signed Tax Information Authorization form.
  • Your recent federal tax returns.
  • A personal financial statement.
  • A form listing your business’s fixed debts.

If this feels overwhelming or if you don’t trust yourself to get the right information, call an accountant. They’re there to help point you in the right direction when it comes to your tax documentation.

Step 3: Investigate other small business recovery options.

Did you know the government is offering more than the SBA Economic Injury Disaster Loan? There are other options out there for small businesses. Here are a few:

  • Paycheck Protection Program: This is a separate loan that you may qualify for if you have employees and keep them on payroll for 8 weeks. You have to use the money for payroll, rent, mortgage interest, or utilities, but if you do, the SBA may forgive your loan.
  • SBA Debt Relief: If you’ve taken out a loan elsewhere, the SBA may cover up to 6 months of principal, interest, and other fees that you owe. This relief applies to current 7(a), 504, and Microloans in regular servicing status as well as new 7(a), 504, and Microloans disbursed prior to September 27, 2020, but not to the Paycheck Protection Program or Economic Injury Disaster Loan.
  • Small business grants: It is possible to get free money through grants. Sure, finding a grant can take time, but trust me, it’s worth the effort. For example, Amazon is offering $5 million to support small businesses in Seattle, and Verizon is offering up to $7.5 million in grants to business in underserved communities. There are even specialty grants geared toward female, veteran, and minority entrepreneurs.

Step 4: Secure your business with insurance.

Look, these are tough economic times, and you never know what can happen. It’s best to be prepared in a worst-case scenario, especially if your business is already going through tough times.

So if you don’t have business insurance, now may be the time to get a policy. Just one accident, injury, or loss could potentially put your business under, especially if you’re already short on cash. Depending on your industry, you may want to look into general liability (GL) insurance and professional liability insurance.

GL insurance can help cover the costs if a third-party (a customer or vendor) is injured at your business. These costs, especially medical expenses, can be expensive. In some instances, GL insurance also can cover damage to a customer’s property if you or an employee caused that damage.

Meanwhile, professional liability insurance is important for businesses who give advice or sell a service. It can help cover you if a customer accuses you of negligence, copyright infringement, and more. It can even help cover the costs of hiring a lawyer to defend yourself if you get sued.

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Step 5: Explore crowdfunding.

If you have an attention-grabbing product, this option may be for you. Who knows, the public may fund your business all on their own. One area to explore is a crowdfunding website, like Kickstarter or GoFundMe. Promote a measurable goal that resonates with the public. Then consider a reward for investors who contribute to your campaign.

Finally, and most importantly, write an intriguing story about your business and its product. Tell people how you’re overcoming adversity during COVID-19 (if true) and if your business performs humanitarian efforts. Your story may speak volumes to the public.

Step 6: Apply for other loans.

If you didn’t qualify for an SBA Economic Injury Disaster Loan, chances are, you won’t qualify for a bank loan either. That said, it doesn’t hurt to check. Banks usually only offer loans to businesses with good credit and collateral. Even if you don’t qualify for a bank loan, talking to a representative there may give you ideas. For example, there are online lenders who specialize in small business loans for business owners with lower credit scores .

You can also try getting a loan through a credit union. They’re similar to banks, but are nonprofits owned by customers. Loans from credit unions are usually competitive, but if you get one, their rates are low.

  • First, find a credit union near you.
  • Apply to become a member.
  • Once you become a member, open an account and make a deposit.
  • Apply for a loan.

Good news—credit unions are pretty quick to review loan applications. So you won’t have to wait long before finding out if you qualify.

Step 7: Stay resilient.

Times are tough for nearly everyone. You will only get through this by staying resilient. Try to embrace changes, stay optimistic, and become a problem-solver. Remember that it will take creativity and a sense of purpose to persevere during COVID-19. And most of all, don’t forget to take care of your own well-being, too!

Emily Thompson

I earned a B.A. in Journalism from the University of Wisconsin at Madison (go Bucky). After realizing my first job might involve carrying a police scanner at 2 am in pursuit of “newsworthy” crimes, I decided I was better suited for freelance blogging and marketing writing. Since 2010, I’ve owned my freelance writing business, EST Creative. When I’m not penning, doodling ideas, or chatting with clients, you’ll find me hiking with my husband, baby boy, and 2 mischievous mutts.

Emily writes on a number of topics such as entrepreneurship, small business networking, and budgeting.