Business credit denied: how to get the reasons

A no on a business application is not the end of the information. The Equal Credit Opportunity Act and its rule, Regulation B, cover credit extended primarily for business purposes, and they give a business applicant a way to find out why.

What counts

Regulation B calls it adverse action. The first item on its list is a refusal to grant credit in substantially the amount or on substantially the terms requested. A counteroffer for less, on different terms, can be one too.

If the business had revenue of $1 million or less

This covers most applications for loans, lines and cards, but not trade credit, factoring or similar credit (see below).

• The lender must tell you what it decided. It may do that orally or in writing.
• You have a right to the reasons. The lender may tell you about that right when you apply, instead of when it denies you.
• For an application made entirely by phone, an oral statement of the decision and of your right to reasons is enough.

Ask for the reasons. Write down who told you and when.

If revenue was over $1 million, or it was trade credit

For larger businesses, and for trade credit, factoring and similar credit at any size:

• The lender must tell you its decision within a reasonable time, orally or in writing.
• It must give a written statement of the reasons, but only if you ask in writing within 60 days of being told.

A supplier that turns down your request for net 30 terms falls in this group. The 60 days is the date to watch.

If your personal credit was part of it

Many small business applications pull the owner's personal report. If a decision used yours, the personal-credit rules apply to that part: Credit Help's guide to denial letters walks through what you can get and when.

What to do with the reasons

• A thin or missing file: time and accounts that report.
• An error in a file: correct it with the bureau that holds it, with proof.
• Too little revenue or time in business: a smaller first step, such as a microloan or a lender that specializes in young companies. The SBA's Lender Match prepares a summary of interested lenders two business days after a request, though it does not guarantee a match or a loan. See SBA loan requirements.