How to Get a Small Business Loan If You Have a Bad Credit History

A bad business credit history directly impacts your ability to acquire new lines of credit, including securing a small business loan. It is obvious that most financial institutions and lenders interpret poor credit ratings as a venture’s inability to pay debts. Fortunately, the expansion of the credit market has made it possible for small businesses to acquire loans especially from www.advancefundsnetwork.com even with low credit scores.

Here is a guide to acquiring small business loans with a bad credit history.

What Does It Mean to Have a Bad History in Credit?

A business credit history is a record of how a venture has demonstrated its ability to repay debts and pay bills over a period of time. The credit history, as assessed by Woodlands Money Lender is evaluated using varying elements, including outstanding debts, pending bills, credit usage, and length of business history.

In this case, where there is a record of defaulting payments, late repayments, and missed tax filings, the business is said to have a bad credit history. This record is documented in a credit report defined by what is commonly known as credit scores. The lower the score, the poorer the credit history.

How Can You Get a Business Loan with Bad Credit?

It is quite difficult to secure a business loan with a bad history. But it is not entirely impossible.

Here are ways through which you can get a business loan with bad credit.

• Provide Loan Security or Collateral – The presence of collateral improves your chances of securing a loan with any lender. Regardless of your credit score, your inability to finance the loan is secured against the issued collateral. For those seeking options, consulting a comprehensive list of licensed money lender in singapore can help you find lenders who are more likely to accept your collateral and offer favorable terms
• Get a Business Plan – A business plan demonstrates that your venture has the financial tenacity to repay debts, even with a bad loan repayment history.
• Explore More Loan Options – Most traditional financial lenders have stringent loan policies, and it might be extremely difficult to get a business loan with a bad credit score. But there are more appealing options that can land you a better offer to finance your business needs.

Pros and Cons of Bad Credit Loans for your Business

Bad credit loans provide small businesses with a financing solution where low credit scores create a limitation. However, bad credit loans can be equally damaging.

Here are some pros and cons of bad credit loans worth considering.

Pros

• Quick Processing – Most bad credit facilities are quick loans. Applying for and receiving such loans takes as little as a few minutes.
• Chance to Improve Your Credit Score – Repaying a bad credit loan on time enhances your credit score.
• High Approval Rates – Since your credit score is not a consideration, bad credit loans come with very high approval rates.
• Loan Repurposing – The good thing with bad credit loans is that you can use the money for both business and personal reasons.

Cons

• Bad Credit Merchant Account – A bad credit loan attracts, by default, the high-risk merchant label. This means that you can enjoy payment processing services with a high-risk merchant account.
• High-Interest Rates – Bad credit loans are quite expensive to repay. If you are operating a high-risk merchant account for having a bad loan repayment history, the cost of borrowing can be ridiculously high.
• Regulatory Risks – Some bad credit lenders may not necessarily be licensed to operate.

Where Can You Get a Business Loan for Bad Credit?

The various sources of business financing with bad credit include;

• Business Credit Card – Getting a business credit card is easier than sourcing a traditional loan. You do not need a credit rating to secure one, therefore giving you access to a credit limit than can finance your business needs.
• Term Loan – Term loans provide bad credit businesses with one-time lump sums which are repaid over an extended period and by stipulated terms.
• Merchant Cash Advances – This is a type of financing provided by a payment processing provider. The advance allows businesses to access the lender’s cash flow in exchange for future sales.
• Invoice Financing – If your business has outstanding invoices, then you can use such invoices as collateral for a small business loan.
• Equipment Financing – Bad credit businesses can borrow money to purchase pieces of equipment, which are in place, and are used as collateral for the loan.

Tips to Help You Pick the Right Bad Credit Loan for Your Business

It is crucial to compare bad credit loan offers to ensure you get the most competitive, low-risk deal. Here are some tips for you.

• Understand Your Bad Credit Needs – Not all bad credit loans are suitable for your business. Understanding your needs will help you settle on a loan type that serves your interests. Examples of bad credit loan types include advances, secured loans, unsecured debt, and payday loans.
• Determine Loan Costs – Look through the available loan options and compare the cost of each. Find out the interest rates, processing fees, and other charges to determine the total cost of a loan offer.
• Keep Off Predatory Lenders – The lending sector is flooded with scammers and predatory lenders who will do anything to get into your wallet. Do your research to ascertain the licensing and operational approvals of a lender.

Conclusion

Having bad credit should not limit you from financing your business demands. Some bad credit loans can be equally fitting to your funding options, including term loans, invoice factoring, and advances. However, before applying, get your homework done to ensure you get the best deal with the right lender.