A practical guide for UK SMEs applying with alternative lenders 

Securing finance is a common hurdle for small businesses across the UK. Many SMEs find themselves rejected by traditional bank lenders, and sometimes even by alternative lenders, at a time when cash flow and growth capital matter most. Understanding why applications are declined, and what you can do differently, is essential if you want to successfully access the funds your business needs. 

1. Traditional lenders have strict criteria — and that isn’t always fair 

High-street banks and many traditional lenders apply rigid rules to loan applications. They often require: 

• Long trading histories (typically 2+ years) 
• Strong balance sheets and profitability 
• Perfect credit records 

If your business is newer, growing rapidly, seasonal, or operating in what banks consider higher risk sectors (like hospitality, contractor services or retail), you may still be fundamentally solid, but not a fit for a bank’s narrow risk profile. 

This is where alternative lenders like Rivers Funding can offer a real advantage, tending to base decisions on the strength of the business itself, and not just on rigid checkboxes. 

2. Common reasons loan applications fail 

Lack of equity or collateral 

Many lenders want reassurance you (or a guarantor) have enough tangible assets. Without this, they see higher default risk. Rivers Funding, for example, asks for a UK homeowner guarantor whose equity matches the loan amount. If you don’t have that, your application may be declined. 

What you can do: 

• Consider finding a guarantor with equity. 
• Explore alternatives like unsecured or revenue-based lending where suitability exists. 

Your legal structure or location doesn’t meet criteria 

Some lenders will only finance limited companies or LLPs registered in certain areas. For example, for a Rivers loan, your business needs to be registered in England and Wales.  

What you can do: 

• Check eligibility criteria before applying. 
• If your business operates outside lender coverage, look at wider alternative lenders or specialist finance brokers. 

Poor credit history or active judgments 

Active County Court Judgements (CCJs), personal defaults or adverse credit events can lead to rejection, even if your business is performing well. Many lenders treat personal and company history as part of risk assessment. 

What you can do: 

• Settle CCJs and improve personal credit before applying. 
• Be transparent and provide supporting financial information to lenders who consider your situation on its merits.  

3. Packaging your application for success 

When lenders assess your application, the quality of the submission matters as much as the underlying business numbers. Some key tips include: 

• Include everything underwriters need 
• Incomplete documents slow decisions or trigger automatic declines. Make sure your application includes: 
• Up-to-date company accounts 
• Cash flow forecasts 
• Bank statements 
• Business plan or purpose of funds 

Demonstrate a clear and credible plan 

Lenders want to see not just historical performance, but that you understand how the finance will be used — whether it’s bridging cash flow gaps, buying seasonal stock, or funding strategic growth. 

4. Don’t stop at one “no” — explore alternatives 

A rejection from a bank isn’t the end of your journey. In the UK:  

• The Bank Referral Scheme requires banks to refer rejected businesses to finance platforms that can match you with alternative lenders who are more flexible. This ensures viable firms aren’t left without options.  
• Alternative lenders, including independent ones like Rivers, actively look for ways to help SMEs thrive by providing the right finance solution for their needs. 

5. Choose the right type of finance for your needs 

Alternative lenders often offer a wider range of options tailored to SME needs, like: 

• Short-term cash flow loans for working capital 
• Medium-term growth funding loans for expansion projects 
• Such products can be more flexible around trading history, sector and application requirements than standard bank loans. 

Rejection is not a dead end 

Getting turned down for a loan happens to many businesses, but it doesn't have to stop you from securing the capital you need. To improve your chances: 

• Understand why lenders decline applications 
• Prepare and present a complete, credible application 
• Explore alternative lenders and schemes that specialise in SMEs 
• Be open to different finance products that match your cash-flow needs 

By tailoring your approach and working with lenders who understand small business realities, you stand a far better chance of securing finance that helps your business thrive.