Why small business owners get denied

The reasons behind the rejections

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.