Business Loan Options for Those With Bad Credit Scores
Regardless of where your business is, you’ll need a boost in funding at some point. It might happen due to circumstances you find yourself in, or due to incorrect debt finance planning. Consequently, it may send you into a phase of bad credit, and as it is, you may face a challenge where getting business loans is concerned. Good news is, you can still get a business loan regardless of your credit history. But let’s learn the tweaks and tricks first.
Bad Credit for Business Loan
If you’re below 650, you already know how difficult it is to get approval from traditional financial institutions. But here’s why 80% of business loan applications get rejected: financial institutions club your personal credit history with other factors to gauge your payment capability. So your application is instantly rejected when you fall below the 650 mark.
Therefore, let us learn about a few personal steps you can take before applying for a business loan.
What You Should Do When Applying for a Business Loan
(a) If your score is under 650, separate your bad personal credit status from that of your business. The trick is – start an LLC or a Corporation.
(b) Establish a business profile using your acquired EIN. It tends to be separate from your personal credit history, so it won’t affect your application. In fact, this is the easiest way to build a strong business profile when you have a weak personal credit profile that needs attention.
(c) Your business financial statement should be totally independent from your personal financial statement. Make sure you separate these records.
If you’ve followed the above 3 steps, then you are safe to apply for a business loan even if you have a history of bad credit.
Substitute Loans and Trade Credit
Maybe you need a small amount of money, or funding for a small duration. You can apply for a loan with a relatively fair option of trade credit. These can be used for almost everything that a business loan can be used for, not limited to making purchases for raw assets and materials.
The good thing about trade credits is that they are often easy to acquire since they have minimal rules, plus they don’t conduct background credit checks.
In some cases, trade credit can be obtained even without giving guarantees. However, the problem is, this process may not be very simple, so it may require external help. If you don’t have enough time and patience, then this might not be a viable option for you.
Elements of Loan Products Designed for Small Businesses and Entrepreneurs
Even though business owners with bad credit are often shunned, a good number of loan products have been tailored specifically for this category of business owners. These loan products come with terms such as comfortable payments, long maturity, lower installments, interest rates and down payment. One such example is online lender BusinessLoansDirect.com.
Therefore, if you operate a business or are looking forward to start one, your options are endless. In fact, you’re almost guaranteed for approval as long as you’re genuinely seeking for a business loan to keep your business afloat. And the good thing is that you can always separate your bad credit records from your business loan application so that it doesn’t affect your outcome.
Remember that even though everyone else seems to be offering loans on the web, not all of them will provide cheap loans per say. They might be having better terms of service, i.e. such as not reporting your payment records to the credit bureau and so forth. Those claims may be true. However, when it comes to payments, you suddenly realize that the loan you were offered was too expensive, almost a rip-off. Therefore, shop wisely, and remember that bad credit history doesn’t always mean you can’t get a loan.