The fact is that if you have bad personal credit, you are severely limited when it comes to finding business financing. However, it is not impossible to get business loans with bad credit. There are three things you have to have to get a small business loan with bad credit:
One of the first things you need to do is make sure that you actually have bad credit. For many people, their credit is poor, but not bad. Since it is not as high as they are used to, they think it is bad.
Find out what the lenders actually think is bad credit. Then, get your credit report, and do a good sweep of it to make sure everything is accurate, and that any mistakes that are on it are addressed right away. Look at your credit report and see if you have any R9’s. If not, you should be fine, but if you do, you will need to explain them to the lender or there is no way you are going to get a business loan.
If you want to get a business loan with bad credit, you have to have something to leverage the debt. Assets that are worth something are a must if you have bad credit and want a business loan. This might be cash, real estate, vehicles, machinery, etc. Basically, provide the lender with some reassurance that if you were to default on your loan, there is something of value they could collect to minimize their losses. Getting an unsecured business loan will not be possible with bad credit.
Comprehensive Business Plan
If you have bad personal credit, your best chance at getting a business loan is to have a great business plan. No lender is even going to look at you if you don’t have a great business plan. Make sure you include why you are qualified to work in the industry, what your competitive advantages are, what you do, who your competitors are, and why you can beat them out for market share. Do not assume the bank knows what your plan is, or why you are better, spell it out in a comprehensive business plan that they can easily read.
Last, but not least, if you have poor personal credit and want to get a business loan, consider establishing some business credit that you can use to apply for a loan in the future. If you can’t get an SBA loan or some other traditional loan, there are other options. Lenders all have different qualifications, so if you aren’t a good fit, you might be for a different lender. You also may qualify for a business line of credit or a cash advance.
Don’t give up if you get turned down initially. Most business loan applications get rejected. There are other options. Lendio is a great tool/resource for finding a business loan with bad credit, just use our free business loan finding tool. Lendio’s mission is to empower your small business by making small business loans simple through options, speed, and trust. Find out which business loan is best for you.