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Denied an SBA 504 Loan? Top 10 Reasons Why – and Why All Hope Is Not Lost

If you’re a minority, woman, or veteran business owner who was turned down for an SBA 504 loan, you’re not alone – and all hope is not lost. SBA 504 loans are excellent financing for buying commercial real estate or equipment, but qualifying can be challenging. Many entrepreneurs in underserved groups face extra hurdles in the approval process. In this guide, we’ll explain the top 10 reasons SBA 504 loan applications get denied and explore the unique challenges (and solutions) for minority-owned, women-owned, and veteran-owned businesses. Most importantly, we’ll show you how a “second look” lender – like us – can help you overcome a denial and secure the funding your business needs.

Common Reasons SBA 504 Loan Applications Are Declined (Top 10)

Understanding why SBA 504 loans get denied is the first step toward overcoming a rejection. Here are the top 10 reasons your SBA loan application might be disqualified or declined:

Low Credit Scores or Credit History Issues
Insufficient Cash Flow or Weak Financials
Too Little Collateral or Down Payment
Lack of Owner Investment (Equity) in the Business
Not Enough Time in Business or Experience

Business Size or Revenue Exceeds SBA Limits
Ineligible Business Industry or Purpose
Excess Liquidity or Credit Available Elsewhere
Past Defaults or Legal Problems (Background Issues)
Ownership Not Meeting SBA Requirements (Citizenship or % Ownership)

Why Minority-Owned Businesses Get Denied (Top 5 Reasons & Challenges)

Minority entrepreneurs (including African American, Hispanic/Latino, Asian American, Native American, and other people of color) start businesses at a high rate, yet often struggle to secure loans like the SBA 504. Minority-owned firms experience higher loan denial rates than non-minority businesses due to a mix of systemic and financial factors. Here are the top 5 reasons minority business owners might be disqualified or denied for an SBA 504 loan, and how to tackle them:

Low Credit Scores

Poor or limited credit history raises red flags and often leads to loan denial.

Insufficient Cash Flow

If your business can’t show enough income to cover loan payments, approval is unlikely.

Too Little Collateral

Lack of pledged assets or down payment weakens your application.

Lack of Owner Investment

Lenders expect owners to invest their own funds, not rely entirely on debt.

Why Women-Owned Businesses Get Denied (Top 5 Reasons & Challenges)

Women-owned businesses are a fast-growing segment of entrepreneurship. However, women entrepreneurs can face unique challenges in the lending world. Studies show women business owners are approved for loans at slightly lower rates and often receive smaller loans on average[31][34]. Here are the top 5 reasons women-owned businesses might be denied an SBA 504 loan, with insights on overcoming them:

Why Veteran-Owned Businesses Get Denied

Veteran-owned businesses bring the leadership and discipline from military service into entrepreneurship. The SBA offers veteran-specific resources (such as training programs like Boots to Business), yet veterans still report financing shortfalls and loan denials at notable rates[40][41]. If you’re a veteran business owner who didn’t qualify for an SBA 504 loan, consider these top 5 reasons and challenges that might be at play: