The bank said no.
That is one lender, not the market
If your bank turns you down or moves too slowly, the main alternatives to a bank loan are an unsecured loan from a specialist lender, a revolving credit line, invoice finance, revenue-based finance and, for machinery or vehicles, asset finance. Each fits a different need. A bank’s decision tells you about that bank’s criteria, which are often the narrowest in the market.
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Where else a limited company can borrow
- Specialist and online lenders
The nearest thing to a bank loan: a fixed sum over a fixed term, usually unsecured. Many decide in minutes using your bank statements, and some lend to businesses a bank would not. Expect a higher rate for the speed and the wider appetite. Unsecured business loans.
- A revolving credit line
If the need is a series of gaps rather than one sum, a limit you draw on and repay is often cheaper than a loan, because you pay only while the money is out.
- Invoice finance and revenue-based finance
Both lend against something other than your accounts: your unpaid invoices, or your card takings. That is why they work for businesses a bank declines on thin or old figures.
- Asset finance for equipment and vehicles
Hire purchase or leasing, secured on the asset itself. Our sister firm CW Asset Finance arranges it.
Which alternative fits which reason for a no
Banks decline for a handful of reasons. Each one points somewhere different.
A general guide. Our declined guide takes each reason in turn, with who still lends.
What changes when you leave the bank
Speed and appetite go up; price usually does too. A bank lends cheaply to the businesses it is most comfortable with, often secured and often to existing customers. Specialist lenders take on more of the rest, decide faster and charge for both. That is a fair trade when the alternative is no money, or money too late, and a poor one if you could have waited for the bank. How rates compare with the Bank of England average.
The paperwork changes too. Most specialist lenders want six months of bank statements and the latest filed accounts, often through Open Banking, rather than a business plan and a meeting. A director’s personal guarantee is normal on unsecured lending to small companies, so read what you are signing.
Other routes worth knowing about
The British Business Bank, the government’s economic development bank, supports lending through accredited lenders and runs the Start Up Loans programme for people starting out. Its site lists what is currently open, and schemes change, so check there rather than relying on an old article.
Beyond borrowing, there is equity: selling a share of the company to investors, which costs no interest but costs ownership. Grants exist for specific purposes and regions, and are worth a look if your project fits one, though they are rarely quick. And your own suppliers may extend terms, which is the cheapest credit there is.
Before you try anywhere else
Ask the bank exactly why it said no, and write the answer down. Banks are not obliged to explain in detail, but most will give the headline reason, and it is worth more than any generic advice: a decline on trading history points one way, a decline on security another. Then resist the urge to apply everywhere at once. Each full application can leave a search on the file, and a cluster of them in a fortnight reads to the next lender as a business in trouble. Choose one alternative that fits the reason, and apply there first.
Common questions
Are alternative lenders more expensive than banks?
Usually, yes, on the rate. They lend faster and to a wider range of businesses, and they price for that. The fair comparison is the total cost in pounds against the cost of not having the money when you need it.
Can I still get a loan if my bank has turned me down?
Often. Banks tend to have the narrowest criteria, so a bank decline is a poor guide to the rest of the market. Find out the reason first, because it tells you which alternative is worth trying.
How do I know a non-bank lender is legitimate?
Check that it is a real company on Companies House, that it has a proper website and complaints process, and be wary of anyone asking for an upfront fee before lending. Business lending to companies is mostly unregulated, so these checks matter. We only work with established lenders on our panel.
Do alternative lenders ask for a business plan?
Rarely for working capital or smaller loans. They read bank statements and filed accounts instead. A plan matters more for a start-up, a large sum or a new venture with no trading record behind it.
Is a government-backed loan an option?
Possibly. The British Business Bank supports lending through accredited lenders, and its website lists what is currently available. The decision is still made by the lender, on its own criteria.
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