We get this question frequently! Lots of people are concerned about their credit score and whether they qualify for loans. The good news is you still can! A traditional bank may be wiry about giving you a loan, but there are several alternative options to choose from, especially if you have a constant stream of revenue. We’ll walk you through how to get a loan for your business with bad credit.
Where Do I Start?
Make sure you find out what your score is and that everything is up to date, without any glitches. If there are any issues to address, make sure you can and do — it’s important to be honest about your bad credit, especially if you are inquiring for a business loan.
Write a Detailed Business Plan
If you want a business loan, you need a clear plan on how you expect to create revenue streams and budget enough to pay back a loan. Having a structured plan will give lenders a peace of mind when it comes to loaning you money for your business. Lenders want to feel confident you can pay them back. Even something as simple as a business plan can significantly increase your chances of getting a business loan.
Research Your Options
Now that you’ve figured out your credit score standing, it’s time to research what your alternative loan options are and what you qualify for. Spend some time looking around, and don’t forget it doesn’t have to be a local business. Make a list with 3-5 of your best options, and write all the criteria you need to apply and qualify. Always reach out to companies if you have questions. Loan agreements of any kind can be confusing, and you want to find what option best suits your business.
You’re Ready, Time to Apply!
Now that you’ve covered your bases, you’re ready to apply! You want to make sure you’ve covered the previous steps to be prepared for questions that may arise regarding your application. Just go through your list of 3-5 options, starting with the ideal choice for your business, and go through them all. Having 3-5 votes is a fair amount to give you options.
What If I Apply and Don’t Receive an Offer?
You might have two additional options to help get you your business loan if you’ve applied to all the options on your list, but none of them are approved.
You can offer collateral to back up your loan. That way, if, for whatever reason, you cannot pay back your loan, the lender has an option to get their money back. Using collateral is a pretty safe bet to getting a loan, even with bad credit, because it’s safe and secure for the lender.
Make a list of potential cosigners. Now that you have your business plan and have an idea of how to pay back a loan, maybe you can ask someone you trust in your life to help cosign the loan. If you have a structured business plan to show them and explain your circumstances, you might be able to find someone to help you out! You could also offer a small equity share as an incentive for your cosigner.
The good news is you don’t have to be discouraged if you have bad credit. As you can see, you have plenty of options and avenues to take to meet your financial business needs. There’s also several options versus getting a loan to acquire money for your business, for example, invoice factoring or a credit line. Having bad credit doesn’t have to be a dead-end for your business.