Using Alternative Lending When a Bank Denies a Loan

Your business plan has been developed and you are ready to see your business come into fruition, but when you attempt to secure a loan through a traditional bank you find yourself getting denied. Luckily for you, there are alternative lending options to take into consideration when a bank denies a loan. Learning more about these options can help you decide which path to securing finances for your business is right for your situation.

Find an Investor 

Some business owners are able to find alternative lending sources in the form of outside investors. Angel investors, in particular, can be helpful to startup businesses because they can also provide business advice to help protect their investment. These types of investors work in groups and determine together which businesses to invest in. Alternatively, venture capitalists are group investors on a larger, professionally-managed scale that can provide a large investment and heavy interest in your business.


Even if a regular bank loan is denied, you may still be able to receive funds through microfinancing companies. The criteria for approval through microfinancing are not as strict as with traditional bank loans so there is a greater possibility for approval. The downside to microfinancing is that the rates and fees are often higher than with bank loans.

Scale Down and Try Again Later

If you are not able to secure funding for your business as it currently stands, another option is to scale back your plans, take time to build a business following, then try again when your business has become more proven and stable. Lenders are more likely to approve a loan if you can show that your business is succeeding and your business plan is being followed.

When banks deny a traditional loan request for a business owner it doesn’t mean the end of the startup plan. Several forms of alternative lending exist for individuals who have the potential to build a successful business and are willing to look at non-traditional funding sources.

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