Why small business owners get denied

The reasons behind the rejections

Watch the overview

Roughly 80% of small business loan applications get denied. The reasons are almost always the same handful of issues, all fixable with advance planning.

Lenders aren't looking for a reason to approve you. They're looking for reasons to say no. Your job: remove every one before you apply.

Here are the top denial reasons, ranked by how often they kill applications.

Key points

Low credit (personal or business). Most SBA loans want FICO of at least 650, 680+ for larger amounts. Business scores need to be established.
Insufficient cash flow. Lenders use debt service coverage ratio (DSCR). They want business income at least 1.25x the new loan payment. Most denials trace to DSCR.
Weak business infrastructure. No EIN, no business bank account, mixed personal and business expenses, no formal entity. These signal hobby, not business.
Not enough time in business. Most lenders want 2+ years. Less pushes you to alternative lenders with much higher rates.
High existing debt. Significant business or personal debt makes more debt look risky. Pay down before applying when possible.

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