If you have good credit, it’s quite easy to get a business loan. Lenders are satisfied with borrowers who represent less financial risk. In case you are experiencing bad credit problems, and you do not have to give up on getting funds for your small business. You may just have to try to do the right thing and seek funding from non-traditional sources. Sooner or later, you may find a lender inclined to offer you a bad credit business loan.
Craft a business plan that suggests how you will fund your small business and make money. In case your small business plan is stable and solid, a lender may be more likely to approve your business loan request despite your bad credit score.
Get a copy of your personal as well as your business credit report in case you have previously established business credit. Check both personal and business credit reports for precision, and if there is any imprecision or incorrect entry try to discuss this with the credit reporting agency and fix it.
It is also recommended to apply for a business loan with a lender who have good reputation in the market and who specializes in helping people with bad credit problems. Normally, these lenders have more permissive lending terms and standards. You may have to accept higher interest rates and less attractive terms, however.
The other way you can get a business loan is to get a cosigner in your business who has good credit. The cosigner will be somewhat responsible for the loan repayment in case you default on it.
Offer collateral for a loan. When you have something valuable to offer as collateral, a lender may consider you less of a risk. And if you default on a loan, the lender may recover the money you owe through the sale of the collateral.
Take on a business partner who has superb credit and request him to apply for a business loan. Your new partner does not have to be actively involved in running the business to get a business loan. If he consents to permitting you to own the business, he can stay in the background and claim a share of the profits, but still get the funding you require.
One more way to get the capital is to apply for home-equity loan and use the money you get to cover your business expenses. Some home-equity lenders are more permissive with bad credit borrowers due to the fact that the equity in a home serves as collateral.
Set up business credit by securing credit cards in your business name and by opening utility accounts. In case you pay these on time and they document to the credit bureaus, you’ll sooner or later build up an excellent business credit rating. Normally most of the lenders usually consider your business credit rating in addition to your personal credit.
Ask your family and friends to loan you the cash you require for your small business. This may be your last option in case your credit is just too bad for a business loan from a conventional lender.
Additionally you can apply for peer-to-peer financing. With this sort of lending, a lender will offer a business loan. Normally, peer-to-peer lenders are less strict about credit.