Currently lenders are tightening their lending criteria and are requiring a minimum credit score of 620 and higher down payments for loans. According to the badcredit.org almost one-third of the Americans are suffering the penalties of low to bad credit scores. 34% of businesses are disqualified for funding due to bad credit score.
One of the most difficult things to do when starting your small business can be finding the best startup business loan for bad credit. Upon receiving your funding request, the lenders will evaluate your credit score first, if your credit score is not up to the mark, they may reject your request or possibly offer high interest rate loans. They may also ask you to provide collateral against the loan amount.
What Score Is Considered As Bad Credit?
The credit score is classified into four categories, which include;
Excellent Credit Score – 720-850
Good Credit Score – 690-719
Average Credit Score – 630-689
Bad Credit Score – 300-629
Factors Causing Bad Credit
- Charge off
- Closed accounts
- Default on obligation
How Bad Credit Affects Your Entrepreneurial Life?
- High interest rates on your credit cards and loans
- Credit and loan applications may not be approved
- Higher insurance premiums
- Calls from debt collectors
- Difficulty starting your own business
Bad Credit Business Loans
Business loan with bad credit is especially intended to help businesses experiencing bad credit issues. These loans can help business owners to fund the growth of their small business even with bad credit. There are two types of funding when it comes to getting a business loan with bad credit. The first type is secured business loans with bad credit and the second one is unsecured business loans with bad credit.
Secured Business Loans for Bad Credit
The secured business loans for bad credit involves collateral and personal guarantee requirement, which means you have to provide some sort of collateral or personal guarantee to your lender to secure the loan. And if the loan is not repaid, the lender can claim the secured asset to recover his money. These loans can be used for a variety of purposes, including expansion, asset purchase, and working capital and so on.
Unsecured Business Loans for Bad Credit
Unsecured business loans for bad credit provides collateral-free funding. This loan has an attractive advantage over secured loans. However, there are some lenders that require personal guarantee for this type of funding. These loans carry a higher annual percentage rate (APR).
The Role of Alternative Lenders in Bad Credit Business Loans
As compared to banks and credit unions, the alternative lenders are considerably more considerate. Depending on the lender and loan type, they will only consider collateral and some other factors when approving a bad credit startup business loan. Plus they have a variety of business financing programs that are appropriate for almost every credit type.
Don’t let bad credit keep you from starting your small business. Get business loan with bad credit without any collateral. If you have any questions or concerns, please call us on our toll free number (833) 827-4412. Alternatively, get your free online quote by filling our online application form, if you’re ready to apply for bad credit business loan.