Less than perfect credit doesn’t only impact a person’s ability to obtain a credit card, car loan, or home loan. Bad credit can also put a damper on starting a business or operating a business.
Don’t let your credit score deter you from reaching your business goals! Read on and explore how to get a business loan with bad credit.
The Lowdown on Credit Scores
Lending money is all about risk—for the lender, not the borrower. Lenders need a metric for evaluating risk. They use credit scores!
Traditional lenders prefer a credit score of at least 650. The lower the score, the higher the risk.
If your business is less than a year old, lenders will only look at the personal credit score. Once you’re more established, lenders will look at both personal and business credit scores.
What do lenders consider “bad credit?”
If your FICO credit score falls between 300-629, traditional lenders will lump you into the category of people with bad credit.
Know Your Risk
Before you apply for a business loan, it’s critical to do some homework.
Check your credit before you submit your application. You’re entitled to one free credit score every year.
Understanding the risk, you pose to potential lenders can help you take proactive steps to boost your score. If you’ve been in business for longer than a year, make sure you also ask for your business credit score.
What Will You Bring to the Table?
When your credit score clouds your business image—at least in the eyes of lenders—you’ll want to help your lender see you in a better light.
You may be able to improve your chances of approval for your business loan if you have collateral. Collateral could include things like the title to a vehicle or your home. Your business equipment may also qualify.
Keep in mind collateral only works if you’re applying for a secured loan.
Another option is to bring a co-signer. Your co-signer will need an acceptable credit score. Co-signers may also need to show they can take on the burden of loan repayment along with their financial responsibilities.
Bad Credit Business Loans and Alternative Lenders
If you discover you have bad credit, there’s good news! While most traditional lenders may not extend credit to you, you can work with alternative lenders.
You’ll enjoy multiple benefits when working with this type of lender, including:
- Easy Application Process
- Flexible Payment Options
- Quick Funding
Take time to learn about how to get a small business loan with bad credit. While you may need to lower the amount you request, it’s an excellent opportunity to improve your credit so that in the future, you can qualify for more funding.
Now You Know How to Get a Business Loan with Bad Credit
As you can see, it’s possible to finance your business, even if you don’t have perfect credit. Now that you know how to get a business loan with bad credit go for the dream!
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