If Your Application Is Not Approved

If Your Application Is Not Approved


Most lenders, banks especially, are conservative in
granting business loans. Given the obligation to their
stockholders and depositors, they need to be sure there's a good
chance the loans they make will be repaid.

If your application for credit is not approved, find out
the reasons why. Some of the reasons that lenders often give
for denying a business loan include, for example, insufficient
owner's equity in the business; lack of an established earnings
record; a history of slow or past-due trade or loan payments;
or insufficient collateral. Finding out the reasons may help
you qualify the next time you apply.

The lender will keep you informed about the status of your
application. If you are considered a "small business" (when
your business revenues are $1 million or less, or when you are
applying to start up a business), a lender has 30 days to let
you know, either orally or in writing, whether or not you get
the loan. The 30-day period begins after the lender has
received all of the information needed to evaluate your credit
request. If your application is denied, the lender must give
you either:

* a written statement of the reasons for denial, or

* a written notice telling you of your right to obtain the
reasons in writing. This notice may be given to you during
the application process or at the time of the denial.

The lender also will keep for one year the records relating
to your application.

Different rules apply for larger businesses (those with
more than $1 million in revenues}. Within a reasonable period
of time after getting all the necessary information on which to
base a decision, the lender must decide and let you know
whether or not you get the credit. Then you'll have 60 days in
which to ask for a written statement of the reasons why you
were denied credit; this is important to remember because the
lender need not notify you of this right. The creditor will
keep records of your application for at least 60 days after
telling you of the credit decision. If you request that records
be kept longer, or ask for a written statement of the reasons
for denial, records will be kept for one year.