It’s always better to embrace life’s opportunities from nowhere. Now, whether it comes to expanding your business, adding another showroom, or remodelling the present restaurant space – you need to take advantage of these opportune moments.
As it turns out, you also need considerable money to make good on these newfound opportunities. You can always turn to business loans for help if you are not well-endowed.
But what if you aren’t the best, most deserving candidate for the loan? Can you still earn desirable business loans with bad credit?
Is a business credit score essential to get a business loan?
Running a business requires thoughtful financial planning.
If your business has been running for over a year, you can use personal or business credit scores to lend money. On the other hand, if the company is remotely new and only functioning for a year or so, you will not have any business credit score.
It’s because credit agencies lack information about your business debt management. In such a case, your credit score comes in handy to determine whether you meet the loan criteria.
How to get business loans with bad credit?
You may feel like a bad business credit score might close all the doors to opportunities, but it’s not true. You can do the following to get a suitable business loan even with a bad credit score:
1. Double check the credit score
Make sure that you have copies of your personal and business credit reports. Double-check your scores. If discrepancies arise in the report, you can reach out to the credit bureaus to fix them.
A clear image of your credit score situation will help you determine what kind of business loans you might likely bag!
2. Create a business plan
Many lenders may ask for a detailed business plan along with your loan application. Even if that’s not the case, you must create a thought-out business plan. It will help you recognize the problem areas causing your bad credit.
If it turns out that you have money management issues, the business plan will allow you to get a sense of it so you can ensure not to do it ahead again.
3. Put a collateral
Attaching collateral is always a good idea, especially if your credit score is alarming. It gives the lenders peace of mind that they can take ownership of your collateral if you fail to repay the loan.
That said, try not to put your assets at stake. So, don’t use your house as collateral because if your business project fails, you may also lose your house.
Pick a business loan to use business assets as collateral, such as outstanding receivables or factory equipment.
4. Get a co-signer
Besides collateral, getting a co-signer is also helpful. If someone with a decent credit score willingly co-signs the business loan with you, it gives an impression of safety to the lender. If you cannot repay the loans, your co-signer will step up.
So, make sure only to get a co-signer who is comfortable with this arrangement and can also afford to help.
Over 13.7 million Australians have a credit card under their name. Yet 21% of the same population has been denied from using this credit at all. Why? Bad credit score.
It’s a nightmare situation, indeed. But, it’s also fixable. You can take steps like getting collateral or a co-signer or make a business plan to assure the lender that you have the situation under control.
Do not give hope. There is a business loan out there that will meet your requirements. So, push through!