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 within the 60 day period 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.