At one point in the recent past, a business owner could easily walk into a local bank and immediately apply and qualify for a business loan due to the personal relationship they had with the loan officer at the bank. Since then, things have changed tremendously and these relationships do not exist nearly as much as they did at one time.
We are also experiencing a very turbulent economy right now. So lenders are not necessarily keen to loan money to every Tom, Dick, or Harry that walks through the door.
In today’s world, you are going to qualify for a loan or not based on your credit score. So if you’re the owner of a business, your credit score is incredibly important and something that you have to work on if it’s in poor standing.
With that said, let’s take a look at the most important things to know about getting a small business loan with bad credit.
1. Check with Smaller, Local Banks for a Small Business Loan with Bad Credit
Although we mention that it’s not as popular as it was in the past, it’s still possible to get a small business loan from a local bank in your community. As a matter of fact, local banks want to work with local small businesses and form a lasting relationship.
The thing about getting financing from local banks is that they are going to look into your business’s credit score and your personal credit score. They will look at your outstanding balances, your payment history, your unsecured debt, and other areas to decide if you qualify for a loan from their branch.
If all looks well, small local banks will be happy to loan money to your business. They want to support the local economy and see it thrive. Just make sure that you have a high credit rating for your business and a high personal credit rating in case they need you to personally guarantee the loan.
At the end of the day, if your business has a good credit rating and you have a poor credit rating, you may still qualify for the loan. So don’t worry because all hope is not lost if your personal credit rating is suffering when looking for financing for your small business.
2. Check Online Specialty Lenders for a Small Business Loan with Bad Credit
Your next option is to look into online specialty lenders. These lenders have specifically set up their business to loan money to companies that are a higher credit risk.
As you can imagine, when dealing with a specialty business lender of this type, you are going to pay a higher interest rate than the current going rate. This is because you will be a greater credit risk based on your poor credit history, and they will only be willing to loan you money if you are willing to take it at a higher rate.
But if you need this money to grow and expand your small business, it might be worth it to pay the higher interest just to get a loan. In the near future paying off such a loan will greatly improve your credit score, it’s at this point you could use online platforms to look for more favourable small business loans in Canada (or elsewhere more relevant) to have more capital to invest into your business, only this time the interest rates will be much more manageable.
3. Look into Small Business Credit Cards When You Have No Other Options
Finally, if you’ve run out of options, small business credit cards are a definite possibility. Sure, the interest rates are often very high, but it’s worth it if you get the credit you need to keep your business afloat.
According to Smallbusinessloans.co, a website sharing more info on small business loans for people with bad credit, “If you are interested in applying for a small business loan there are some different options for you.”
So keep your options open and keep this information in mind if you’re a small business looking to get a loan when you have bad credit.
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