Frustrated lady applying for equipment financing

How Financing Rejection Impacts Customers

Along with the challenges of navigating a global pandemic, small business owners face a credit squeeze. Securing financing is more difficult than ever as lending agencies and big banks tighten requirements and deny applications at much higher rates. Whether they’ve experienced one credit rejection or several, struggling entrepreneurs need a lifeline to grow their businesses. Here’s what you need to know about the current state of credit denials and how you can help.

Financing Rejections on the Rise, Especially for Millennials

Financing denials occur for several reasons—low FICO score, insufficient time in business (TIB), debt-to-income ratio, or even a loan amount that’s too small to appeal to traditional lenders. But with standards tightening, the margins of acceptance grow narrower. During the pandemic, 21% of consumers in the U.S. were denied credit. And Millennials, whose income potential suffered during the 2008 recession, took the hardest hit in 2020: 32% of credit seekers aged 24 to 39 were rejected for credit compared to 22% of Gen-Xers (40 to 55 years old) and only 11% of Baby Boomers (56 to 74 years old).

Many entrepreneurs in your target audience are Millennials and carry the same burdens as they persevere in their business goals. As an equipment seller, you want to build strategic partnerships with customers who will be in business for decades to come. 

So how can you capture these dejected younger customers? Position yourself as an ally in securing credit approval, empathize with their struggles, and try to help them stop the rejection train.

Multiple Rejections Pile Up for Credit-Challenged Customers

When business owners get rejected, it can be intimidating to apply again. “It’s a shot to your pride,” one 27-year-old entrepreneur told Bankrate after experiencing denial for both an auto loan and a business credit card to secure a vehicle for her business. Further, repeated credit checks can lower your customer’s overall credit score—which is especially galling when there’s no approval to show for it. 

What’s the next step for a consumer who’s suffered multiple denials? Clicklease offers point-of-sale financing on a single item of equipment and pays sellers directly. Because the loan is self-collateralized (that is, all the capital is tied up in the piece of equipment your customer purchased), it’s lower risk than a cash disbursement—and easier to attain approval for people who might not otherwise qualify. 

See how instant approvals and installment-based purchasing makes your product more affordable for entrepreneurs to start their own businesses, equip them for growth, and scale for long-term success.

Turn Rejection into Resilience

Certainly, the conditions brought on over the past year by a global pandemic did nothing to boost morale as many businesses shuttered their doors or relied on emergency federal assistance to get by. It’s a tough time for anyone to grow an entrepreneurial dream.

But there’s a silver lining: adversity can turn into opportunity for persistent small business owners. Buy-now-pay-later (BNPL) financing might fit better for credit-challenged customers who can’t qualify for traditional small business loans. Because Clicklease’s proprietary underwriting algorithm doesn’t rely on FICO scores the way traditional lenders do, applications are approved at a much higher rate and much more quickly. And your customers can make lemons into lemonade by thriving in a changing market.

In some form or another, rejection hits everyone, even legendary entrepreneurs—Walt Disney suffered over 300 rejections for financing in building Disneyland. Helping your customers find success through appropriate financing can turn their fortunes around and help you build a dedicated customer base for future equipment purchases.