Can You Get a Business Loan With Bad Credit?
When it comes to business loans, you might find that your business will be turned down time and again if you have bad credit. This is because any lender will look at your credit history just as closely as your business' credit if you have not been in business for long. This does not mean that if you have bad credit you can not get a business loan, there are just some steps that you will have to go through before you can gain the working capital you need to keep your business running. So, before you head out and place your applications with every lender in town, you should take some steps to curb the bad credit and know what you are up against.
The first thing you need to do is to obtain a credit report. You can find hundreds of sites online that can help you print out your credit reports. You can get one free credit report from each of the three major credit bureaus once a year, or you can gain your credit reports from one of the online companies for a small fee. Once you have your credit report, you will know what your scores are and you can start to improve on them before they go down any further. If your credit score is really low, you do not want to apply for any business loans because most lenders will have a 60-day waiting period before you can file another one, no matter how much your credit improves. Instead, you want to try to improve your credit rating before you start applying for business loans. There are a few ways to do this, but we will talk about the two main ways:
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Dispute the problems in your credit file – In the Fair Credit Reporting Act, anything that is placed on your credit file must be consulted with you personally and any type of conversation giving permission to place the item on your credit has to be recorded as proof that you said it is ok. Without this proof, any item that is placed on your credit file can be disputed as incorrect and should then be deleted. It is not so much an issue of whether the information is correct or incorrect, but more an issue of if permission to place the item on your credit was given or not, as by this law it is inadmissible. When you are disputing an item on your credit, you must send them by registered mail to the credit bureau where the incorrect item was found and you should request that the item be removed from your file. You should get a response from the reporting agency within 30 days.
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Get a loan that will pay off any outstanding debts – This can be in the form of a home equity loan, personal loan, or unsecured loan that will help to pay off smaller debts that can be tying your credit up. By paying off these smaller loans, your credit rating will improve significantly. Usually, banks or other lenders will provide a pre-approved loan if you currently have an account in good standing with them as part of their packaging to members. Make sure that when you are getting a loan to pay off your outstanding debts that you use the money to do just that or you will not improve your credit score at all. You should also make sure that you request the company or business place your account as paid off on your credit to help raise your score.
If you take these two major steps to begin to raise your credit scores, you might find that your credit is still not high enough to gain the business loan that you need. In these cases, a lender might simply require that you have a co-signer if they see that you have been trying to raise your credit score and pay off smaller loans. If traditional lenders fail to approve a business loan after you have taken both of these steps, you can begin to check with some of the sub-prime lenders to see if you can gain a business loan through their company.
For businesses that use mainly credit cards as a form of payment, such as a restaurant or retail outlet, invoice factoring is another great way to find the working capital that you need without worrying about credit scores or lending institutions. Merchant Advisors can help you by providing the working capital that your business needs immediately and allowing you to make the payments that you want without breaking your business' day to day working capital. For more information, simply fill out our form and you will be speaking with our friendly customer service representatives shortly and on your way to gaining the working capital you need.
