A good credit score is often considered as one of the best ways to identify someone’s financial knowledge. It determines whether you can get a loan or not, which ultimately can give you the financing you need to make your business a thriving success! It also shows how smart you are when it comes to dealing with money.
Today, I’m going to speak with you about how you can get business financing even if your credit score is bad. Here are a few tips that you can follow and get a financing for your business:
• Most people assume that their credit score is too bad for a loan. However, before actually concluding that your credit score really sucks, you have to be sure of that it is not worth getting a loan.
Although, it is a fact that a bad credit is not eligible for a loan, no matter what, but it is always advantageous first ensure the status of your credit score.
• If you do have bad credit, then first and foremost, consider separating your personal credit from your business credit. While most financing companies focus on both personal and business credit scores before approving a loan, some companies are lenient and verify only business credit.
This is your chance of gaining the trust and getting the loan approved for your business.
• If you have never taken a business loan before, then it’s great news for you. Why? Because that means you have no bad business loan and it would be real convenient for you to convince the financing companies.
There are several such financers that don’t consider personal at all if you have a no-business-loan background.
• Another easy way to get a business loan is to speak to your family and friends. A lot of times, people get loans from unexpected people including friends, family and even colleagues at times.
The key here is to be honest with your family members, tell them your business idea, explain to them the potential threats, and risks, so that they can take a wise decision. Also, offer them great returns for their investment and help them understand how their investment would be profitable to them.
• What you can also do is – establish business credit. It is perhaps the most logical step for small businesses with bad credit is creating business credit that is independent of your personal credit.
When you do this, you can easily apply for a business loan without being asked about your personal credit score. However, the downside of this step is, it can take a couple of years for you to establish one.
You might want to start with small loans first. When you do that, gradually, you’ll have a great backup to support your claim for the loan.
• There are many non-bankers lenders that offer micro loans to others at a nominal interest rate. These loans are typically between $5000 to $25000 and are often given with a minimum of 2 years and 10 years of installment options.
A few of such micro lenders are mentioned below:
Accion
Zopa
America One Funding
You can always get to any of these or such companies and apply for a micro-loan.
Till now, we were only focusing on how to get financing when you’ve a bad credit. Let us now focus a bit on how NOT to take a business loan when you’ve bad credit:
There are few lenders that take the advantage of people like you who are trying to get a loan with bad credit. So, always be safe from stuff like:
o Payday Loans
o Tax Refund Loans
o Car Title Loans
These companies charge a really high interest rate that it becomes almost impossible for you to repay. Plus, once you take their help, it gets very difficult to get out of the debt.
At the end, getting financing in spite of having a bad credit can be a daunting task for anyone. However, with the above tips in mind and being confident about yourself can help you comprehend your potential and get the loan approved.