How to Get a Small Business Loan with Bad Credit
Many business owners are struggling to get the capital they need because of their bad credit. This can be a major problem for business owners who don’t have enough personal savings to fund their business or those who are short on time and cannot obtain financing from traditional sources like banks or venture capitalists. If you are in this situation, it’s not too late!
Importance of Business Credit Score for a Small Business Loan
It is important to have a business credit score because it will give you business loans for bad credit. If you do not have a business credit score, it won’t be easy to get business loans for businesses that are not well-established or when there is a limit in access from any other external sources of funds.
Ways to Get a Bad Credit Small Business Loan
Business owners with poor credit ratings might need a business loan or business loan with bad credit. A business loan with bad credit, though, is possible to obtain. It might take more time and research on behalf of the business owner to find a lender willing to lend.
Creating a business plan may also help the business owner get approved for a business loan. Here are some ways you can get funding for your business even if you have bad credit.
Be willing to be credit checked
Being unwilling to be credit checked can raise a red flag with a business loan lender. This may show that the business owner has something to hide or is trying to avoid paying past business debts.
If a business does not want to be credit checked, it probably means they have bad business accounts, and no one would want to lend them money because of that.
Have business bank statements for at least one year
Bank statements help business lenders see that you’ve successfully run a business and can handle business loans. With business bank statements, business lenders will know if your business is profitable and has enough money in reserve funds.
If you’re applying for a business loan with bad credit, banks are going to want proof that the business itself is worth something. Business bank statements are a great way to show business lenders that the business is valuable.
Own real estate that can serve as collateral for the business loan
The business owner can enhance the business loan application by also offering real estate as collateral. Real estate works better than business assets because it has more value and is less likely to depreciate in a short period.
On top of that, business assets can be difficult to value, which makes business loans risky for the lender.
Pay business taxes on time
This may also help business owners get business loans with bad credit. Business loans for bad credit are often contingent on business owners’ fulfilling certain business-related duties, one of which is to pay business taxes on time.
Failing to do so might result in the business owner’s account being flagged for possible business loan disqualification even before they apply for business financing.
If you are an entrepreneur with business credit issues, don’t worry. According to Lantern by SoFi, business loan lenders are willing to work with business owners with bad credit ratings.