How To Get A Business Loan With A Poor Credit History
/Financing is not easy to secure, especially if you haven’t had the time to establish credit for your company. In other cases, you might have made errors that left blemishes on your report. Many small businesses fall into credit trouble because they didn’t understand how credit works, mismanaged their finances, or were negligent. If you are in one of those situations, know that it isn’t hopeless, and there are still things that you could do to be eligible for a loan. Here are a few of them.
Consider alternative lenders
If you have a poor or slim credit history, it will be very tough to secure financing through a traditional lender such as a bank. Instead, consider alternative lenders. . Alternative lenders prioritize your business numbers rather than your credit score when assessing whether or not to extend a loan. If your business has been doing well, you may have a chance at qualifying.
Offer collateral
If you own property, whether it’s under the business’s name or your own, you can put some of it up as collateral. This could be property, equipment, or even inventory. Car dealers, for instance, will often put part of their inventory up as collateral so they can get a loan.
The downside with this is that the lender will be able to repossess anything you put up as collateral if you default on the loan. Therefore, you have to be 100% certain that you’ll be able to pay, especially if we’re talking about something like your house. Another point to consider is that you likely won’t be able to sell the collateral during the terms of the loan. Keep that in mind if you are thinking about using your home as a collateral.
Make as little applications as possible
Generally speaking, each time you apply for a loan it registers as a hard inquiry on your credit report. Too many hard inquiries can negatively your score as it shows signs of economic distress and desperation. Before applying for a loan, do research on the lender and carefully review their lending policy. Also, try to privilege lenders that will allow you to conduct a soft preliminary inquiry so that you don’t trigger a hard inquiry unnecessarily.
Build your credit score
Lastly, it goes without saying that taking steps to build your credit score will also help improve your chances. For tips on how to improve your credit score, check out this Money & Mimosas article.
Bottom line
It is possible to increase your chance of getting a loan application accepted with poor credit. Follow these simple tips and actively work on building your credit starting today.
Disclaimer: the content presented in this article is for informational purposes only, and is not, and must not be considered tax, investment, legal, accounting or financial planning advice, nor a recommendation as to a specific course of action. Investors should consult all available information, and consult with appropriate tax, investment, accounting, legal, and accounting professionals, as appropriate, before making any investment or utilizing any financial planning strategy.
