If you're a small business owner looking to take your company to the next level, you may be wondering how to get a loan with bad credit. The short answer is it's possible, but not easy. You'll need to spend sometime gathering information about your options and researching the different types of loans available. But don't worry: we've got you covered! We'll walk through what makes up a good business plan and explain how it'll help you secure financing from even the most conservative lenders out there. We have tips for improving your credit score so that lenders will consider giving you capital based on your future earnings potential rather than past mistakes that led to insufficient cash flow (and therefore no ability to repay).
Here's everything you need to know about getting started with small business loans when bad credit is standing in between where you are now and where you want.
1. Understand your option.
There are many options available to you when it comes to getting a small business loan with bad credit. You can get a business loan without collateral, or you can get one with no credit at all. If you have both of those things together--bad credit and no collateral--you might be able to still qualify for a loan!
Small business loans are generally easier to obtain than personal ones because they're less risky for lenders; the collateral that protects them is the asset itself (your business), rather than your personal assets like a house or car.
2. Shop around for a loan.
While your credit score may be less than stellar, there are still lenders who will consider you as a potential customer. It's important that you get quotes from different lenders and compare the terms of each loan before making any decisions about which one is right for your business.
You should also make sure that if one lender does offer financing at an attractive rate, it doesn't come with hidden fees or other costs that could add up over time--and ultimately make the loan unaffordable once all its terms are taken into account.
3. Get your financial house in order.
The more cash you can put towards your loan, the better. If you have any credit card debt or other loans, pay them off as quickly as possible. This will reduce the amount of interest that accumulates on top of what you owe each month, ultimately saving money in the long run.
If reducing expenses isn't enough and investing in yourself doesn't seem like an option (for example: if all of your savings went toward starting up), then consider saving money for rainy days by setting aside an emergency fund equal to at least three months' worth of living expenses (this number varies depending on where you live). Make sure this money is separate from any other accounts so that it doesn't get spent accidentally--or stolen!
4. Improve your credit score.
Keep your credit card balances low, especially if you have multiple cards or charge a lot of money each month.
Don't apply for new credit cards unless it's absolutely necessary (and even then, only after getting approval from one of our lenders).
Don't close old accounts; they'll help keep your overall debt ratio down and demonstrate stability in case we want to check back with one of our partners in the future!
You can also monitor your credit score by opening an account with MySCOREIQ, a trusted business credit monitoring site.
Getting a business loan with bad credit can be a challenge, but there are ways to do it.
If you're looking for small business loans with no collateral and no credit check, consider applying for one of these options:
Business Line of Credit - A line of credit allows you to borrow money as needed and pay back the amount in installments over time. You'll need good financial history in order to qualify for this type of loan.
Merchant Cash Advance - This type of financing allows companies that provide services (such as restaurants) or goods (like retailers) to access cash immediately by taking out an advance on future sales made through their business accounts. Unlike traditional loans where borrowers must repay the interest each month along with principal balances over time periods ranging from one year up until 25 years depending upon how much has been borrowed; merchant cash advances require only one payment at closing plus any applicable fees associated with obtaining them (which usually range from 2% - 5%).
We hope this guide has been helpful in showing you how to get a small business loan with bad credit. Remember that there are many options available, so don't give up if the first one doesn't work out! Keep looking until you find the right lender who can help fund your business idea.
Disclosure: For Change Financial only recommends products we would use ourselves. All opinions expressed here are our own. This page may contain affiliate links and we may earn a small commission, at no extra cost to you. Read our full privacy policy on our website.
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