Short answer
A profitable business is usually declined for one of five reasons: the repayment story is unclear, the documents are inconsistent or incomplete, there are unexplained tax or debt balances, the projections are unsupported, or the request went to a lender whose mandate never covered it. Four of those five are packaging problems, not credit problems.
This page is general information about how lenders in the Canadian market usually behave. The figures are norms observed in practice rather than published rates, and no lender is bound by any of them. Your own file decides the answer.
A lender does not assess your business. They assess the file. When a healthy company is declined, the gap is almost always between what is true and what the file shows.
One. The repayment story is missing
Revenue is not a repayment source. The question in the credit memo is where the payment comes from every month, and what happens to that source if next year is flat. A file that answers this in a paragraph, with the numbers attached, is doing more work than one with another year of statements in it.
Two. The documents disagree with each other
The interim statements say one thing, the bank statements say another, and the ageing does not reconcile to the balance sheet. An adjudicator will not spend an afternoon working out which is right. They will assume the least favourable version and price for it, or decline.
Three. There is something unexplained
- CRA source deduction or HST arrears with no payment arrangement.
- A merchant advance taking a daily remittance that does not appear anywhere in the debt schedule.
- A large shareholder loan movement with no note.
- A gap year with no commentary.
None of these is automatically fatal. All of them are fatal when the lender discovers them rather than being told.
Four. The projections have nothing under them
A forecast that grows twenty percent a year with no named contract, no capacity change and no pipeline is read as hope. A forecast that shows a signed contract, the capacity it requires and the cost of delivering it is read as a plan. The difference is evidence, not optimism.
Five. It went to the wrong lender
Every lender has a mandate: a size range, a sector list, a security preference, a risk appetite. A deal outside it is declined without ever being properly read. A deal shopped to twelve lenders comes back marked, and the marks follow it.
How to tell which one applies
- Ask the lender for the specific reason, in writing. Most will give it.
- If the reason is coverage or leverage, that is a credit problem and it needs a structural fix.
- If the reason is documentation, clarity or fit, it is a packaging problem, and the same deal presented properly to the right lender can go the other way.
- Do not send the identical file to the next lender. That is the most common and most expensive mistake in this process.
Questions
- How long should I wait before applying again?
- Long enough to fix the reason. Applying again the same week with the same file produces the same answer and adds another enquiry.
- Does a decline show up anywhere?
- The credit enquiry does. The decline itself is not published, but a deal that has been widely circulated tends to be recognised.
- Can a broker get a decline overturned?
- Sometimes, where the decline was about presentation or fit. Not where the debt service coverage genuinely does not work.
Where this shows up in practice
- Advisory and deal preparationThe work that happens before a lender sees anything: the request, the evidence, the repayment logic and the lender list.
- Refinancing and debt restructuringConsolidating expensive or badly structured facilities into a schedule the business can actually carry.