Dealing with bad credit? Whether it’s due to a little bit of financial mismanagement when you were younger or a few bad business decisions that led to a negative credit score, bad credit produces the same effect on anyone who has it. If you have bad credit, it’s often harder to get favourable loan terms and conventional lenders like banks may put higher restrictions because they need extra security.
This doesn’t mean that you can’t get a loan ever because you have bad credit. You can still take advantage of business opportunities and grow your business if you know where to get the right loans.
Read on to know how you can get a business loan with bad credit.
Know your score.
The first thing you need to do is research your current score so you know what you’re working with. Check your personal and business credit scores by requesting copies of your credit reports. During this time you can check for errors and correct them, which could get you a higher score than when you started. Knowing your current score also gives you an idea about the kind of bad credit loan that is open to you.
Know your options
The next step is to look at options open to people with your score. People with bad credit can get loans from business credit cards, short term loans, microloans, and merchant cash advances. All these options are designed to assist those with no credit history, those with negative credit and those coming from underprivileged backgrounds. You may need to comply with a few conditions specific to each type of loan option which is also designed to ensure that you can pay your loans on time, keep and even improve your credit scores. Sites like NowLoan.co.uk specialize in providing a quick and handy comparison of common loan options so you can get a comprehensive idea about which loan sources offer the best rates and terms for your situation.
Have a good business plan ready
If you are looking to take your chances with conventional lenders and even the lenders mentioned in the previous section, coming in with a business plan is always a good move. Poor credit rating is often an indicator of past financial mismanagement. You want to show lenders that you learned from your mistakes and you are taking every precaution this time around. A business plan shows lenders what you can do to make a profit and what steps you are taking to avoid risks. Look up business plan templates online or get customized assistance from your local small business development centre.
Get a co-signer
Most banks offer loans to people with bad credit if a cosigner is present. A cosigner could be a friend or a family member with good credit who is willing to guarantee to take over loan payments in case you default.
Getting a business loan even if you have bad credit can be challenging but it is perfectly doable. Just make sure that you do your homework and you come to the lender prepared. It is also wise to only choose loans that you can pay on time so you can avoid adding negative marks on your credit.