With the average startup costing as much as $30,000 to $40,000, it’s hardly surprising that the vast majority of businesses rely on some kind of early funding. Unfortunately, while there are now many financing routes to pursue, just 48% of small businesses meet their financial needs this way. Worse, as many as 9% of all small businesses receive no capital at all after a loan application.
This can come as a significant blow, and can too easily feel like the end of a business before it’s begun. In reality, though, if every one of that 9% simply gave up after this hurdle, the world would miss out on some fantastic new business pursuits. Luckily, that doesn’t often happen, because instead of accepting defeat, most determined small business owners will instead look at the following lessons to be found within a declined startup loan request.
# 1 – You’re pursuing the wrong routes to funding
As mentioned, there are now many forms of small business funding, but countless companies still stick to mainstream banking when first seeking business finances. This makes sense because it’s perhaps the easiest option to get in motion, but banks that deal with countless loan requests and likely know next to nothing about chosen business areas like farming are far more likely to decline even a viable offer based on stringent restrictions. By comparison, private industry investors, peer-to-peer loans, and even independent investment firms are far more likely to see the potential in even a budding small business enterprise.
# 2 – Your figures don’t add up
A wise investor will always take things like upfront costs into account alongside profit margins before committing. If you’re, say, attempting to buy an entire farm that could take you ten or more years to pay off with current predictions, then no investor in their right mind would even consider it. In these instances, your rejection should push you towards more viable ways to pave your path, including options like the affordable land investment now offered from platforms like Farmfolio. That way, you’ll be in a position to request way less money while always offering the best possible profit projections in general.
# 3 – There’s something wrong with your market
Let’s say your business plan is strong but you still receive a funding rejection. In this instance, it may be the case that your market, rather than your project, is the problem. After all, industry-specific investors, in particular, know a lot about things like finances across the industry, upcoming advancements, and beyond. While your research should obviously highlight most of this, it’s still possible that you’re simply not aware of industry realities which may ultimately mean that, right now at least, you would be better off considering alternative business routes or niches.
It’s easy to assume that loan rejection is a brick wall to your business, but this can actually become the most useful tool for securing your startup if you simply consider why it’s happened, and what you need to do to change it.