As a small business owner, applying for a loan could be the difference between stagnancy and growth. It could also be the difference between seeing your business float or sink. Having a bad credit score could be a significant hindrance for a small business owner looking to obtain a business loan. The lower your credit score, the riskier you and your business are perceived.
Is it still possible to apply for a business loan with a bad credit score? Yes, it is. Having a bad credit score is not the end of the world for you and your business. You can still get a business loan by taking the right steps.
But, how do you get small business loans for bad credit? We’ll show you how to do so in this article. The tips below are precisely what you need for a loan application with a bad credit score. Visit caminofinancial.com to get started.
1. Offer up some collateral against business loans
If you are finding it hard to secure a loan due to your bad credit, you can offer up some collateral to creditors so that you can get a business loan. You can offer up collateral like personal assets, savings or cash account, investment account, and customer invoices that are yet to be paid.
The downside of this is that it is risky if things go very wrong for your business. You may end up losing what you offered up as collateral. You should only offer up collateral that you don’t mind losing.
2. Make your payments early on time
Avoid making late payments as often as you can. Ensure that all your outstanding balances are brought up to the current on an urgent basis. The more regular repayments you have, the better your credit score will be. If your credit score improves, you have a higher chance of securing a business loan.
3. Take your time in finding an alternate lender
Many small business owners often limit their lending options when searching for small business loans for bad credit. There are other lenders that won’t mind extending you a loan regardless of your credit history. These alternate lenders will require criteria that are more easily accessible, like ITIN numbers.
Take your time and find those lenders.
4. Ask recent creditors to vouch for you
If you’ve been paying your recent creditors on time, they will be happy to vouch for you when you need to obtain a small business loan. A simple word here and there or a written letter of approval will go a long way in helping you secure a new loan. This letter will show their trust in your ability to repay loans when due.
5. Keep your business and personal expenses separate
If you have a bad personal credit score, you will do well to keep your business credit score separate. Start this by opening a new business credit card and applying all business and office purchases to the new credit card. As your business grows, your business credit will become more important than your personal credit history.
So long as you continue making repayments early and keeping a low credit balance, your business credit will be great. This will help you get small business loans for bad credit faster.
6. Consider having cofounders or partners with great credit
If your credit score is bad, you can consider having partners with great credit score history. Their good credit score history will go a long way in securing much-needed business loans.
7. Avoid opening multiple credit lines
To improve your credit score and make it easier to obtain small business loans for bad credit, avoid opening multiple lines of credit. Multiple credit lines can lead to unnecessary excess spending, which will make it difficult for you to make payments on time. Apply for new credit lines only when they are critically needed.
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Follow the steps listed above, and you’ll have a higher chance of success obtaining small business loans for bad credit.