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How to Get a Business Loan with Bad Credit
November 11, 2016
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How to Get a Business Loan with Bad Credit

As you probably already know, maintaining an above average credit score is immensely important when it comes to running a small business. This can be especially pivotal when you’re in need of additional working capital, and are considering applying for a small business loan from a lender.

In this post, we’ll offer tips on how to get a business loan with bad credit, and a few ways to build business credit. Let’s get started, so that your business can get the financing it needs!

How to Get a Small Business Loan with Bad Credit

1. Research Credit Score Requirements

In the preliminary stages, do research on which lenders supply loans for small business owners with bad credit. This will be especially important if your credit score is under 500. Some lenders are relatively lenient on this, but a less-than 500 credit score may make a lender apprehensive about working with you.

Don’t waste your time applying with a lender if you don’t meet their credit score requirements. Instead, focus on ways to build business credit, and apply at a later date. If you’re in a crunch and need additional working capital as soon as possible, try and find a lender with a lower credit score minimum.

2. Have a Clear Business Plan

When applying for small business loans with a low credit score, it will be helpful to have an organized business plan that you can share with the lender. They will appreciate your plan for growth, especially if it is evident that you’re following through with it. Be ready to share your monthly sales amount, and hopefully you’ll be able to show improvement in your business’s finances. Even if your credit score isn’t stellar, a lender may be more apt to work with you if they can see an upwards growth trajectory.

3. Be Prepared to Receive a Higher Rate

When applying for working capital from a lender, you’ll need to consider the rate they are providing you with. If your business has a low credit score, it may result in you receiving a higher rate than a business with an above average credit score. This is because the lender will likely assess you as a higher risk customer; so think about whether or not your business will be able to responsibly pay back the amount.

4. Build Business Credit

If you’re serious about learning how to get a business loan with bad credit, the answer might be pretty simple; try and improve your credit score prior to applying for working capital. First, you’ll need to examine your business credit report so that you can see your score and determine if there are any discrepancies. While raising your score isn’t something you can achieve overnight, if you’re not in a rush, you may be able to raise your score, and then focus on applying. Make sure to keep reading, because #7 features a simple way to help build your business’s credit.

5. Pursue a Merchant Cash Advance

If you’re interested in a small business loan, but have a low credit score, you may be better off applying for a merchant cash advance. Maybe your business credit is below average, but you have consistent bank deposits each month. If you’re applying for a merchant cash advance, a lender will look for a large amount of deposits in small amounts. Having a poor credit score might be overlooked in this case.

6. Ask Family or Friends for Money

If you’re in a bind, and need financing immediately in order to keep your business up-and-running, consider asking a friend or family for some cash. While we don’t recommend taking a loan from a loved one, if you know someone who would be generous enough to give you money to get by until you can apply for working capital, you can work to improve your business credit. Then, once it has increased, you can apply for a business loan from a lender!

7. Pay Bills on Time

Build business credit by paying your bills on or before their due date. Paying bills late can be a contributing factor to why you have a low credit score, so make this a priority moving forward.

Hopefully this post has provided you with ideas on how to get a business loan with bad credit! Don’t get discouraged when going through this process, there are lenders out there who will provide loans for small business owners with bad credit.

Fora Financial

Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author's alone, and have not been reviewed, approved, or otherwise endorsed by any of these entities.

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Fora Financial is a working capital provider to small business owners nationwide. In addition, the Fora Financial team provides educational information to the small business community through their blog, which covers topics such as business financing, marketing, technology, and much more. If you’d like to see a topic covered on the Fora Financial blog, or want to submit a guest post, please email us at [email protected].
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