Can You Get A Business Loan with Bad Credit?
Running a business with bad credit isn’t always easy. You’re limited by the financing options you can turn to, and approval is challenging. Poor credit can limit your company’s growth—all because of some mistakes you made in the past.
Fortunately, it doesn’t have to be this way. There are ways you can still get approved for a loan, even with a less-than-stellar credit standing.
In this article, we’ll discuss simple ways for how to get a business loan with bad credit. We’ll also look at alternative options in case banks and other mainstream institutions turn you down.
How to Get Approved
Getting a business loan with bad credit is challenging, but not impossible. Some banks will approve loans even for those with a mediocre credit standing. It just takes a little convincing.
The key is to be prepared and set your expectations. Here’s how to get a small business loan with bad credit.
Check Your Personal Credit
Before you proceed with looking for bad credit business loans, you first need to know where you stand. You should check your personal credit and see if it’s up to date.
Also, be on the lookout for any errors in your credit report, and immediately dispute any you find with the credit bureau. Correcting these small mistakes may adjust your credit score enough for you to qualify for loans.
Research Credit Score Requirements
You should shortlist the lending companies and banks that offer business loans for poor credit. That’s because you’ll be wasting your time applying to a lender that has a high credit score requirement.
This is a necessary step, especially if you have a credit score below 500. If you don’t qualify for any, your time is better spent on improving your credit or looking for alternative sources of funding.
Create a Business Plan
When you apply for business funding with bad credit, banks generally view you as a risk. One of the best ways to convince them otherwise is if you have a solid business plan.
Any bank needs to know how you’ll use the loan, and more importantly, how much projected sales your business can generate. It tells them whether you can repay the loan or not.
Even if you have bad credit, having a financially viable business is often enough to swing things in your favor.
Build Your Credit Score
Improving your credit score is still the best, long term solution to increase your chances. That way, you avoid the worry of stressing about bad credit every time you need funding.
Of course, it’s not a quick fix. You need time to change your financial maturity, and then prove that to the credit bureaus.
If you need a loan right now but have bad credit, consider turning to family and friends for funding. They’re a good option until at least your credit standing improves.
Get a Cosigner
If you’ve exhausted all your sources of funding, here’s how to get a small business loan with bad credit: find a cosigner. He or she is someone with fantastic credit history who will guarantee to the banks that you’ll repay your loan in the future.
A cosigner is a great workaround to get small business loans on bad credit, but make sure the other party is comfortable with the agreement.
Small Business Loans for Bad Credit
Fortunately, there are alternatives for those with a poor credit history. For example, you can typically get an SBA loan with bad credit.
L3 Funding makes it easy to get bad credit business loans with our different financing options:
Short Term Loans
L3 Funding’s short term small business loans are great if you need a quick infusion of cash. They require no collateral and have flexible payback plans to suit any business. You’ll also get access to the fund faster with minimal paperwork and fast approval.
Line of Credit
L3 Funding’s secured business line of credit product gives you a ready supply of on-demand funding when you need it the most. The great thing about it is that you’ll only pay for the cash that you use, so you don’t overspend on unnecessary interest payments.
Merchant Cash Advance
Merchant funding from L3 is an excellent option for businesses that have a high volume of daily payments, such as retailers and restaurants. Here, you get to hedge these future sales so you can get a lump sum of cash, even if you have a bad credit history.
The good news is that there are still valid financing options for business owners with bad credit.
However, if you’re still having trouble securing bad credit business loans, we invite you to get on a one-on-one funding consultation with us. We say yes when most banks say no. Contact us to apply now!