Why good businesses get declined
Banks are built to lend at scale against a rulebook. That suits most borrowers most of the time, but it means plenty of sound businesses get a no for reasons that have little to do with whether the loan would be repaid. As a broker you see it constantly: a client with real equity and a real plan, declined because one box didn't tick.
The usual reasons fall into a handful of groups:
- Credit policy. The industry, the security type, the loan purpose or the structure falls outside policy.
- Serviceability. The last lodged financials don't show enough income, even though current trading is stronger, or there was a one-off bad year.
- ATO debt. An outstanding tax debt or payment plan is an automatic stopper for many lenders.
- Defaults or judgments. A credit file blemish, sometimes old or small, sinks the application.
- Financials not lodged. The client is behind on tax returns, so there's nothing for the bank to assess.
- Timing. The bank might say yes eventually, but not before the client's deadline.
How Equity Tap looks at a declined scenario
We start from different questions. Is there property security with enough equity? Is the purpose a business purpose? Is there a realistic exit within one to twelve months? If the answers are yes, the reasons the bank declined often matter much less to us.
There's no credit check at initial assessment, and bad credit history, defaults, ATO debt or a past decline are not automatically a problem. A credit check may be made before funding. We don't need tax returns, BAS, profit and loss, an accountant's letter or bank statements for a property-secured loan, so a client who is behind on lodgements isn't ruled out. We don't order a valuation before approval either.
Matching the decline reason to a solution
| Why the bank said no | How we can often help | Typical exit |
|---|---|---|
| Serviceability on old financials | Short-term loan secured on property, no financials needed | Refinance once new financials are lodged |
| Outstanding ATO debt | Loan to clear or reduce the tax debt | Refinance with the ATO debt cleared, or cash flow |
| Default or judgment on file | Assessment on security and exit | Refinance once the issue is resolved, or asset sale |
| Outside credit policy | Different policy, decision-maker on the phone | Sale, refinance elsewhere or cash flow |
| Bank too slow for the deadline | Bridge while the bank completes | Bank refinance settles |
| Bank won't lend the full amount | Second mortgage for the shortfall | Cash flow, sale or later refinance |
Short-term is often the smarter answer
When a client is declined, the instinct is to look for another long-term lender. Sometimes the better move is a short-term loan that fixes the reason for the decline, then a mainstream refinance once the file is clean. Pay the ATO, lodge the overdue returns, let the strong trading show up in the figures, then go back to the bank as a better applicant. You keep the client through the whole process, and the long-term refinance is yours to write. Our exit strategy guide covers how to plan it.
For example
For example, a broker's client runs a transport business that had a poor year two years ago, then recovered strongly. The bank assessed the older financials and declined a top-up. The client needs funds to cover a fleet repair and a quarter's fuel account. A second mortgage over their home for six months, with interest added to the loan, covers the need while the latest returns are lodged. The broker then refinances with a mainstream lender on the new figures and the loan is repaid.
What we need to see
- The decline reason, in your words. Don't dress it up; we've seen most of them.
- Security property and existing mortgage details
- Loan amount, purpose and term
- The exit and its timing
- ID for borrowers and guarantors
Once we have the scenario, conditional approval can often be given on the phone and a term sheet issued in about 30 minutes. Our checklist is on how to submit a scenario.
A lender that explains the loan properly
Declined clients are often stressed, and they're vulnerable to quick fixes that make things worse. We're an ethical lender: before any loan proceeds, we make sure the borrower fully understands the loan, the costs and the exit. Each loan is priced on the client's individual circumstances, aiming for the sharpest rate available for that situation, with the full cost shown up front.
Questions to ask before you send it
- Is there enough equity in the property once existing debt is counted?
- Is the purpose clearly a business purpose?
- What will the client's file look like at the end of the term, and who would lend to them then?
- Is the deadline real, and how many days do we have?
If you can answer those, you have most of what we need for an indicative answer.
Send us the declined deal
Call 1300 123 024 or start at apply. For specific situations see client has ATO debt, declined by a cash flow lender and bad credit business loans.
Business-purpose lending only. Approval, timing and terms depend on the scenario.
Frequently asked questions
My client was declined by their bank. Can you still help?
Do you lend to clients with defaults or judgments?
The bank declined on serviceability. Do you need financials?
Can you lend to a client who is behind on tax returns?
What if the bank will lend, but not the full amount?
How does the client get back to a bank?
How quickly can you give an answer on a declined deal?
Brokers: send the scenario through the Equity Tap broker channel and you will deal with the same lending team.