Guide

Can you find out why you were denied? What a lender has to tell you

Usually yes, and it is a right rather than a favour. Under the Equal Credit Opportunity Act a creditor must tell a business applicant what it decided, generally within 30 days of a completed application, and must give the reasons for a decline — though how it is delivered and what you have to do to get it depends on your revenue.

What the rule actually says

The Equal Credit Opportunity Act and Regulation B cover business credit, not only consumer credit. That surprises most owners, and it is the reason this is worth asking for rather than guessing at.

The general rule is notification within 30 days of a completed application — approval, counteroffer or adverse action. The word completed is carrying weight: if the lender is still waiting on a document from you, the clock has not started.

Below $1 million in gross revenue, the lender may tell you the action taken orally or in writing, and it may hand you the notice of your right to reasons at application time rather than at decline. Above $1 million, the lender notifies you of the decision and must provide a written statement of reasons if you make a written request within 60 days.

The practical reading of all that: ask in writing, early, and keep the request. It converts a vague no into a specific one and starts a clock that someone at the lender is responsible for.

How to ask so you get a usable answer

Put it in writing, by email, to the person who handled the application. Reference the application date and ask for the specific principal reasons for the adverse action. Those words are the ones the regulation uses, and using them tends to route the request to someone who recognises it.

Ask for specifics rather than a category. "Insufficient cash flow" is not usable. Which months, which measure, and against what threshold is. You may not get that level of detail, but the difference between asking for it and not asking is often the difference between a form letter and a phone call.

If credit was a factor, ask which report and which bureau. Business credit files carry errors at a rate that would surprise you, and they are correctable.

Why the reason is worth more than the decision

A decline tells you nothing you can act on. A reason tells you exactly which of three completely different weeks you are in: a calendar problem that resolves itself, an operating problem you can fix inside two months, or a structural problem that means you should be applying for a different product entirely.

It also tells you whether to argue. Declines based on an industry code, a misread deposit pattern or a stale credit file are all things that get overturned on a phone call more often than owners expect, because the file was read by a model and the correction is a human one.

And if the reason is one you cannot change quickly, it still buys you the right question for the next funder: not "will you fund me" but "how do you read negative days", asked before you burn another inquiry finding out.

Sources

Related questions.

Does a lender have to tell a business why it was denied?
In substance, yes. Under the Equal Credit Opportunity Act and Regulation B, a creditor must notify a business applicant of the action taken, generally within 30 days of a completed application, and provide the reasons for adverse action. How the notice is delivered, and whether you have to request the reasons in writing, depends on the applicant's gross revenue.
How long do you have to request the reasons?
For business applicants above $1 million in gross revenue, a written request within 60 days of the notification. Below that threshold the mechanics are more flexible, which is a practical argument for asking immediately rather than working out which rule applies to you.
Does this apply to a merchant cash advance?
The position is less settled than it is for a bank loan, because an advance is structured as a purchase of receivables rather than as credit. Ask anyway — reputable funders will tell you, and a refusal to say why is itself information about who you are dealing with.

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