What should you do when the bank says No?

When a bank says No, it is a natural reaction to think Why, what have I done? In the many instances that I see, the borrower may have been with the bank for many years so a No seems strange. Does track record account for nothing you think?

The bank or whoever you currently borrow from might say No, purely based on the type of property you or buying or are offering up as security. In other words, it has nothing to do with you. In these days of checklists and less human interaction, sometimes there is less out of the box thinking, whereas in fact sometimes there needs to be more.

Another reason a bank says No, is because they have reached their limit on say Property Development loans and won’t lend any more money until an existing development has been completed and the funds repaid.

One of the main reason I see loans being declined, is the lender has changed its lending criteria. This could be something as simple as not lending on apartments below 50 sq.m. or perhaps it has changed the servicing interest rate on its internal calculator and so more cashflow is needed to service the loan requested.

Here’s the good news, there are different lenders for almost all situations. Yes, second tier lenders can be a bit more expensive, but remember, they provide a short term solution, which may see your stress levels reduce or your hopes rise as you can see your profitable property development coming to fruition.

Here are a number of situations where a bank can say No;

• Change in lending criteria
• Have reached their loan book limit on say Property Development
• No Council Code sign off
• Temporary cashflow squeeze by the applicant
• Credit history
• Too much personal debt
• Tax arrears
• Not enough pre-sales
• Not enough equity in the security offered

In addition to the above, whilst the bank may not say No, it might not offer you what you are looking for, for example you have bought a Commercial Property and may be looking for 65% loan to value ratio and your bank may only offer you 40% leaving you with a shortfall.

Usually I can find a solution. In the event that I can’t ( and this is rare), it is best to sit down and make a plan such that a No can be turned into a Yes. This can sometimes be done in a matter of  weeks, sometimes it can take a bit longer.

A solution might just be a 15 minute phone call away so pick the phone and call 021-446-101.