Many companies, big and small, wouldn't exist without the small business loans they received when first starting out. Those early investments are the lifeblood that keeps things flowing until the companies can start making profits. The right small business loans can mean more inventory, more employees, new equipment, licensing costs, repairs and a whole lot more that's vital to your company's success. If you have bad credit, though, getting a business loan can be a tough road. However, most entrepreneurs can obtain a small business loan with bad credit if they just persevere and know the steps they need to take. Read below to learn those steps of how to get a small business loan with bad credit.
Why Bad Credit Small Business Loans are Difficult to Acquire
One of the biggest priorities for banks or any kind of business that lends money is to minimize risks. After all, if a company isn't able to pay back the amount of money they lent, that comes directly out of their pockets. Credit scores, while being a flawed system that will sometimes dock your score for the strangest of reasons, are still an indicator to lenders of whether you're a safe bet or a big risk. It makes sense why they'd prefer to borrow to someone that has a solid credit history, even if it might not seem fair.
How to Get a Business Loan with Bad Credit
A small business loan is definitely harder to obtain with bad credit, but it's far from impossible. There are certain methods of securing a loan that don't depend as much on your credit score. Here are a couple strategies for getting a bad credit business loan.
Get a Small Business Administration (SBA) 7(a) loan for up to $35,000
Some loan programs are government guaranteed, which protects the lenders and persuades many of them to offer financing to entrepreneurs, even those who don't have a strong credit history. The Small Business Administration (SBA) is a government-run agency dedicated to helping people build their businesses whatever the obstacles. Visit this page and go to a local SBA office to learn how to best lay out your case and secure that loan.
Put Items Up for Collateral
A lot of companies, even startups, trying to secure a loan already have items of value like equipment and land that they can use to increase the chance of getting financial help. If that's the case with your business and you feel confident you'll be able to pay any loans you take out back, you can put those things up for collateral to make you seem like a safer investment to lenders. With that they'll know that even if you can't repay your loan they won't end up with nothing.
Getting a small business loan, even with bad credit, is within your grasp. Check out our favorite small business loan lenders and get started today.