Loan refused? Five checks to run before you resubmit your file

1. A refusal is not necessarily a verdict on your project

The most common reaction to a refusal is to take the same file, unchanged, to another bank. It is the costliest mistake in terms of time — and sometimes of the file's own credibility, since every institution consults the same centralised information source before deciding.

The prudential limits an Algerian bank is subject to are assessed at the level of the institution, not the file: a 25% ceiling on regulatory equity per beneficiary, and total large exposures capped at eight times that equity. A saturated bank will refuse an excellent file. Another will finance it without hesitation. We set out these mechanisms in our article on what prudential rules force your bank to calculate about you.

2. Check 1 — Access your Credit Register report, free of charge

The Bank of Algeria maintains a Credit Register for businesses and households, governed by Regulation no. 12-01 of 20 February 2012. Its "businesses" section records credits granted to legal entities and to individuals carrying on a non-salaried professional activity.

What is recorded about you

Banks declare monthly, whatever the amount (Art. 6):

• your identification data, credit limits and outstanding balances, and the collateral taken — both real and personal security — for each type of credit: this is positive data;
• the unrepaid amounts of those balances: this is negative data.

Institutions must also report without delay any significant change in your situation — amendment of the articles of association, change of address, or any information liable to affect your solvency (Art. 10).

Your right of access and rectification

Article 15 is explicit: "Any borrower may access, free of charge, the data recorded concerning them and may request, where appropriate, that the declaring institution rectify erroneous data." It adds that "this right of access may also be exercised by the borrower at the offices of the Bank of Algeria in their wilaya of residence".

Where data is rectified, the declaring institution must communicate the corrected data to the Register, which in turn informs the institutions that consulted your report. A corrected error therefore does not stay locked inside the bank that made it.

Institutions must also inform you that your credits are recorded, of the purpose of the processing, of the existence of rights of access, rectification and deletion, and of retention periods — as well as the first time you are declared for a repayment default (Art. 12).

How long information stays on record

The retention period may not be less than five years (Art. 16). It runs from extinction of the debt for positive data, and from the date the payment incident was declared for negative data. A four-year-old incident is therefore still visible — which does not mean it is blocking, but that it must be explained before the bank discovers it.

3. Check 2 — Establish whether any of your loans is classified

Loan classification is governed by Regulation no. 14-03 of 16 February 2014. A claim is classified as soon as it presents a probable or certain risk of non-recovery, or arrears of more than three months. Downgrading is not discretionary: it is triggered by the calendar.

Three situations are regularly discovered too late:

• The overdraft that never clears. A debit balance which, over 90 to 180 days, records no credit movements covering all interest charges and a significant part of the balance is downgraded to a classified claim — without a single formal payment incident.
• Downgrading without arrears. The text also covers claims whose recovery becomes uncertain owing to financial deterioration: a sector in difficulty, a significant fall in turnover, excessive indebtedness, shareholder disputes.
• Contagion. Downgrading one claim triggers the downgrading of all your other claims into the same category, and turns your irrevocable commitments by signature into doubtful commitments.

4. Check 3 — Map the perimeter of your "connected persons"

Regulation no. 14-02 defines a "single beneficiary" as including connected persons: those whose links, of whatever nature, make it likely that difficulties affecting one will spread to the others. The text presumes such links between entities of a group, persons under common de facto management, those maintaining predominant business relations — subcontracting is expressly cited — and those bound by cross-guarantees.

The consequence: the bank's exposure is not measured on the company applying for credit, but across the whole perimeter. And in the event of an incident, where the counterparty belongs to a group, the bank assesses the impact of the default on the group's position and, where necessary, downgrades all claims on every entity.

Before resubmitting a file, you therefore need an honest list of the entities liable to be aggregated: common shareholders, common directors, commercial dependence, cross-guarantees. That map determines the ceiling actually available to you.

5. Check 4 — Test whether your collateral is even eligible

Rejected collateral is not always insufficient collateral: it is often non-compliant collateral. Regulation no. 14-03 recognises each guarantee only up to a fixed proportion, and under strict conditions.

The conditions in Article 13 are cumulative. Collateral must in particular be unconditional and enforceable on first demand; a mortgage must be registered and first-rank, and one over a commercial building is accepted only if the property is completed and ready for operation; assets must be valued by independent experts on the basis of observed market prices, and covered by adequate damage insurance.

Four grounds for rejection recur constantly: a property under construction, a second-rank mortgage, an out-of-date valuation, and missing or expired insurance. None of them challenges the asset's real value — each is enough to make it inoperative.

6. Check 5 — Change the lever: a guarantor rather than more collateral

This is where the regulation opens a door few files use. Article 8 of Regulation no. 14-02 provides that "where a risk is guaranteed by a third party, that risk is deemed to be carried on the guarantor up to the amount of the guarantee received", with the guarantor's weighting applied. Only the uncovered portion keeps the debtor's weighting.

In other words, a guarantee issued by an eligible body does more than reassure: it shifts part of the exposure outside your own 25% ceiling and lightens your file's weight within the bank's envelope. That is structurally more effective than an additional mortgage recognised at 50%.

7. Resubmitting: the order of operations

Observations from our advisory practice, not regulatory provisions.

1. Never resubmit within the week. A file resubmitted with no visible change in the Credit Register signals that the cause has not been addressed.
2. Fix what is visible from the outside first. In order: errors to rectify, incidents to regularise, accounts to keep moving. The rest comes after.
3. Document what cannot be erased. An old incident that is explained, quantified and settled weighs infinitely less than one the bank discovers for itself.
4. Ask about envelope availability before building the file. The question is simple to put, and a candid answer saves months.
5. Do not file with several banks at once. Consultations leave a trace; a file seen everywhere at the same time loses value.

This article sets out the applicable regulatory framework and constitutes neither legal advice, nor investment advice, nor a guarantee that financing will be obtained. Every situation must be examined against the company's actual financial statements and the policy of the bank concerned.

FAQ — Frequently asked questions

BENSAID Farouk

Financial & Economic Research Consultant — ProfitPilot NextGen Consulting

Certified sole trader and expert in financial studies, risk analysis and market research for SMEs, startups and investors in Algeria. View full profile →