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What to Do if You Can't Get a Business Loan

Chris Porteous
Chris Porteous

There are some key steps you should take if your business needs an influx of cash and you can't get a loan.

For entrepreneurs, oftentimes coming up with the ideas to launch and grow their business is the easy part. It's finding the money to make it all happen that is difficult. For many small business owners, obtaining a loan from a bank or traditional lender is seemingly impossible, leaving them scrambling to find the infusion of capital they need. Luckily, not getting a business loan doesn't have to spell an end to your business. Here's what to do if you can't get a business loan, and why being turned away isn't always the end of the world.

1. Understand why you were turned down.

Before delving into alternative means of raising cash for your business, it's worthwhile to explore exactly why you were turned down for a business loan in the first place. While many entrepreneurs may throw up their hands and give up after being denied a loan, others realize the problem that prevented them from gaining access to a line of credit initially may be solvable later on down the line. If you never know why your business was rejected, you can't hope to strengthen your weak points and return later, more confident and assured of your success than ever before.

It's worthwhile to consider some common reasons that businesses are turned away from loans, as this will help you successfully petition for financial assistance in the future. When you've truly exhausted your supply of creditors, however, and a business loan simply isn't forthcoming, you need to get down to brass tacks and pursue alternative measures of establishing or broadening your commercial empire. One excellent, and uniquely modern, method is crowdsourcing. This option is easier and more profitable today than it was just a few years ago.

Crowdsourcing, as the name implies, depends upon sourcing your funds from a large crowd of people. In most cases, it means taking your case directly to the public and reaching out to thousands, or even millions, of people at once by harnessing the power of digital technology. Social media campaigns and digital marketing efforts have already demonstrated that crowdsourcing can be incredibly effective. The benefits of crowdsourcing are incredibly diverse, such as when NASA relied upon it for idea generation. However, business owners will be interested in the ability of crowdsourcing to drum up huge sums of cash from the popular approval of everyday people who want to see your dreams turned into a reality.

Crowdsourcing your business's capital needs will only work if you can persuasively convince a mass audience to get behind your plans. This is why crowdsourcing is particularly popular amongst startups that have taken to labeling it "peer-to-peer investment," though even well-established business owners can rely upon the method if they know what they’re doing.


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2. Be careful when harnessing digital technology.

Despite the allure of using digital technology to solve your financial needs, this technology must be wielded carefully and with great caution. The digital world is rife with scandal and opportunities to diminish your brand. For instance, if your crowdsourcing campaign inadvertently reneges on promises made to the funding public that is making your project a reality, you could have a public relations disaster on your hands as angry investors boycott your business. It is critical to consider all of the options available before finalizing your decision on how to fund your business.

This isn't to say that digital technology isn't often a godsend for businesses in need of alternative financing. Online lending has been spiking so much in popularity recently that some are beginning to ask whether banks should be worried about this trend. More standard means of raising money, like getting a business credit card, are also rising in popularity as traditional business loans become more difficult to acquire.

We can expect online means of raising money for one's business to keep ticking upward in popularity, especially as more startups join the marketplace. Entrepreneurs and professionals with limited credit histories will find it frustrating, if not downright impossible, to secure a hefty business loan on favorable terms, so the proliferation of digital technology that enables greater peer-to-peer investment should largely be viewed as a win for everyone in the business community. Still, it's imperative to remember that you must be cautious and meticulous when dealing with digital sources of money so you don't get burned.

3. Bolster your cash flow.

One of the most important things to understand is that healthy cash flow is essential to attain a line of credit. After all, those who are lending you huge sums of money need to have some reassurance of a return on their risky investment. Demonstrating that you're capable of bolstering your cash flow ahead of receiving an influx of capital is the only surefire way for any business owner to prove to potential investors that they have the capacity to take a loan and turn it into long-term profitability for everyone involved.

So, how does one go about bolstering their business's cash flow? First and foremost, cut down on any preexisting debt you have. Few creditors will be willing to give your company the money it needs to survive if you're just going to use it to pay off debts to other investors. Learning how to properly manage and increase your small business's cash flow is essential to long-term economic success in a competitive marketplace.

In that vein, you should ask yourself how you intend to cut the fat off your business. Every enterprise has some waste hidden beneath the surface. You may be relying on outdated or inefficient technology, or perhaps your workforce needs some paring down. Whatever it may be, looking at your current business setup and determining ways to cut unnecessary elements from your business's structure will be necessary to get by without a serious business loan to prop you up.

4. Know what it will cost.

Finally, those who shun traditional business loans, or find themselves unable to attain one, need to understand that alternative financing means are alternative for a reason – they often come with particularly high costs. If you have to rely on a third-party lender because a bank or more serious financial operation won't give you the cash you need, it's only natural for them to charge you steep interest rates so they can reap a return on their risky investment. If you fail to factor in the cost of alternative financing from the get-go, you may end up digging yourself deeper into a grim financial hole.

Nevertheless, alternative financing methods have propelled countless businesses of all sizes to success. Dedicated business owners who bolster their cash flow will find that failure to get a business loan doesn't mean they'll be stranded without the cash they need forever.

Alternatives to business loans

If a traditional business loan is outside your reach for the foreseeable future, there are other options to get the funding you need. Here are several alternatives to a traditional business loan:

Lines of credit

A line of credit is a specified amount of money a lender – usually a bank but also some alternative lenders – extends to a business. You can draw on this line of credit as needed, but you will pay interest on the amount you use until it is paid off. If you qualify for a line of credit, it is a great way to access emergency funds quickly without jumping through too many hoops. [Looking for an alternative lender? Check out our picks for best small business loans.]

Short-term loans

A short-term loan is any loan that you are expected to pay back in a year or less. Banks don't usually offer these loans, but they are quite common for alternative lenders. As the name suggests, short-term loans are beneficial when you have to cover a one-time cost or need a small boost to kick your business into gear.

Invoice factoring

Invoice factoring is a type of alternative funding in which a company sells its outstanding invoices to a third party. The invoice factoring company generally pays 85% to 95% of the value of the invoices, giving your business cash fast. The remainder of the original invoice is paid to you once the client pays their invoice, minus a small fee that remains with the factoring company. This type of loan is ideal for businesses that regularly have outstanding invoices straining their cash flow.

Merchant cash advances

A merchant cash advance is money that a lender provides a business upfront in exchange for a percentage of its credit card sales over a certain timeframe. This alternative financing option is ideal for stores that have a high volume of credit card sales each day, such as a restaurant or boutique.


A microloan, typically $50,000 or less, is designed to get small business owners on their feet. These loans are generally not available from banks, but alternative lenders provide them to businesses that need to acquire new equipment, open a new location, or hire staff.

Equipment financing

As the name suggests, equipment financing loans are used to purchase mission-critical equipment. Unlike with other loans, the equipment itself is collateral, which can lower interest rates. If the equipment is valuable enough, the application approval process may run much more smoothly, because the lender's risk is mitigated by the equipment.

Sean Peek contributed to the writing and research in this article.

Image Credit: Dulko / Getty Images
Chris Porteous
Chris Porteous Member
I'm a serial entrepreneur and owner of three internet ventures, including My SEO Sucks. A contributor to ZeroHedge,, Forbes,, and dozens of other media outlets, I believe in SEO as a product. I developed a proprietary technology fueling the #1 rankings of My SEO Sucks clients. In guest speaking ventures across North American, I advocate for organic search traffic as the backbone of any comprehensive digital marketing strategy.