Why did my bank turn down my acquisition loan?

A decline rarely means the business itself has no value. It usually means the specific loan structure proposed doesn’t meet a lender’s risk tolerance, and understanding which piece failed is what actually lets a buyer fix the application rather than simply trying a different bank with the same numbers.

Lenders recalculate adjusted earnings from the historical financial statements and compare that figure against total proposed debt payments, including any other debt the business or buyer carries. If that coverage margin is too tight, a lender has no cushion for a slower year, and that alone is enough for a decline even when the purchase price itself is reasonable.

A thin cash contribution from the buyer signals more risk to a lender, since more of the total price has to be recovered from the business’s own future performance if things go wrong. Lenders also read the down payment as a proxy for the buyer’s own confidence and financial discipline going into the purchase.

A lender underwrites the person as much as the business. Limited relevant industry experience, a thin personal net worth, or credit history issues can sink an otherwise reasonable application, particularly for a business where the outgoing owner’s personal expertise is a large part of what currently makes it work.

A loan heavily weighted toward goodwill, with little in the way of equipment, real estate, or receivables behind it, is harder to secure fully, and a lender may reduce the amount offered rather than decline outright. Restructuring the deal with a larger seller take-back, additional buyer equity, or a co-signer can often bridge exactly this kind of gap.