Decline letters are masterpieces of saying nothing. “Unfortunately your application does not meet our current lending criteria” tells you precisely as much as the weather forecast tells you about your marriage.
The frustrating part is that most declines have a specific, identifiable cause, and a good number of them are fixable in a few months. Here are the reasons that come up again and again, and what you can do about each one.
1. Your accounts don’t show enough
Small companies are allowed to file abbreviated or filing-exempt accounts at Companies House. Plenty do, on the reasonable basis that competitors shouldn’t see the numbers.
The trouble is that a lender looking at your public file sees a balance sheet and not much else. No turnover, no profit, no detail. Faced with a gap, an underwriter assumes the least flattering explanation, because that’s what underwriters are paid to do.
The fix: provide full statutory accounts directly, plus year-to-date management figures. If your filed accounts are 14 months old and show a difficult year that you’ve since turned around, say so up front with numbers attached. Nobody minds an old bad year. They mind discovering it themselves.
2. Bank conduct
This one surprises people. Lenders will often want three to six months of bank statements, and they read them closely.
What they’re looking for: returned direct debits, unpaid items, bounced cheques, persistent unauthorised overdraft use, payments to short-term lenders, and whether the balance is at its lowest immediately before payday every single month. A returned direct debit for £42 doesn’t matter in isolation. Four of them across three months signals a business running on fumes, whatever the accounts say.
The fix: it takes time, which is precisely why it’s worth doing before you need money. Six clean months of statements will change decisions.
3. Adverse you didn’t know you had
CCJs get registered against businesses more often than you’d imagine, sometimes over disputed invoices, sometimes because the claim went to an old registered office and nobody opened the post. Directors pick up personal adverse too, and for many facilities the director’s personal credit file matters as much as the company’s.
The fix: check both before you apply, not after you’re declined. Company files are available through Creditsafe, Experian and Equifax, and you’re entitled to see your own personal file. If there’s a CCJ that’s been satisfied, get the register updated. If it was wrongly entered, apply to set it aside. Either takes weeks, so start early.
4. Existing debt, and how it’s stacked
Lenders look at what you already owe and to whom. A business carrying three short-term facilities with daily or weekly repayments reads as a business already under pressure, even if it’s trading well. Multiple recent applications visible on the file have the same effect.
Directors’ loan accounts get attention too. A large overdrawn balance suggests money leaving the business by a route the lender didn’t sanction.
The fix: consolidate or clear the expensive short-term facilities where you can, and be honest about the ones that remain. Hidden debt discovered at underwriting stage ends applications instantly.
5. Serviceability simply doesn’t work
Sometimes the answer is arithmetic. The proposed repayment doesn’t fit alongside your existing commitments, on the figures available.
The fix: ask for less, ask for longer, or ask for a product that’s serviced differently. Invoice finance and asset finance both flex with the business rather than demanding a fixed monthly sum regardless of trading. A business that can’t service a £250,000 term loan may comfortably run a £250,000 invoice finance facility, because the facility repays itself as customers pay.
6. Customer concentration
If 70% of your turnover comes from one customer, you’re exposed to a decision made in somebody else’s boardroom. Lenders price that concern, and in invoice finance they cap it explicitly through concentration limits.
The fix: it’s a long game, but broadening the customer base is the answer. In the meantime, credit insurance and a demonstrably long, clean trading relationship with that customer both help.
7. Sector appetite, which has nothing to do with you
Lender appetite moves constantly. A lender that loved construction eighteen months ago may have closed the book after a run of losses. Hospitality, recruitment, haulage and property development all go in and out of favour, and it’s rarely announced.
The fix: this is squarely a broker’s job. Knowing who’s actually writing business in your sector this month, rather than who says they do on their website, is most of the value in the relationship.
8. You asked at the wrong moment
Applying three weeks before you run out of money is the weakest possible position. Applying immediately after filing a loss-making year, before the recovery shows anywhere, is nearly as bad.
The fix: put the facility in place when you don’t yet need it. Facilities arranged from strength cost less and carry better terms than facilities arranged from desperation, and lenders can tell the difference from across the room.
The mistake that makes everything harder
Applying everywhere at once.
It feels efficient. It isn’t. Multiple applications leave footprints on your credit file, and a case that has already been declined by a large slice of the market becomes considerably harder to place, even with a lender that would have said yes if it had seen the case properly presented on day one.
Approaching lenders in a considered order, having worked out beforehand who’s likely to have appetite, is not a nicety. It’s the difference between an offer and a file full of declines.
What to do if you’ve already had a no
Ask why. You may not get a full answer, but you’ll often get a steer, and the steer tells you what to fix.
Then fix it, wait a sensible interval, and go back properly prepared. A decline isn’t permanent. It’s information, delivered rudely.
At Compare Your Funding we regularly place cases that have been turned down elsewhere, usually because the case was presented badly rather than because the business was weak. If you’ve had a no and nobody’s explained it, that’s a conversation worth having.
About Compare Your Funding
Compare Your Funding is an independent commercial finance brokerage based in Stockport, registered with both FIBA and the NACFB. We arrange invoice finance, asset finance, property and bridging, trade finance and business loans. Compare Your Funding is a trading style of TGL Solutions Limited.
compareyourfunding.com · 0161 871 9840 · [email protected]
