One Simple Trick to Increase Your Odds of Getting a Bad Credit Business Loan
Getting a bad credit business loan does not have to be as hard as it sounds. There are now alternatives to banking lenders who understand that stuff happens, and that not everyone is going to have a squeaky clean credit rating. If you look at the alternatives available, you will find a way for getting a bad credit business loan that suits your needs perfectly.
If not careful, losing points on your credit score can quickly push you on a downward spiral towards bankruptcy. Your business needs capital to make a profit, and without credit readily available you could be losing out on building revenue. As the situation worsens, your credit score continues to tumble downwards, making you look like an even bigger risk to the lenders you need for getting a bad credit business loan. The only way to stop this cycle is by acting fast and finding an alternative solution to your credit needs so that your business can continue to grow.
Understanding Why You Are Being Denied a Business Loan By Banks
Your business or company does not have its own credit score, but you do. When ascertaining risk for a loan, banks are looking at the credit history of the primary applicant not the profitability of the business. This means that even if your business is able to turn a substantial profit, a black mark on your personal credit history will overshadow that. This can even include relatively small blemishes such as late mortgage and credit card payments.
For lenders, your credit risk is determined by a FICO score. This is a summary of your credit history that lenders use to assess whether or not they should extend credit to you. This also will determine the interest rate of any credit extended. The lower the score, the higher the risk, regardless of the circumstances or reason.
Before beginning to look for a bad credit business loan, obtain a copy of your FICO score and check it for accuracy. You may be able to raise it by having certain items and erroneous information removed. You should also work on reducing your amount of debt and available credit by consolidating credit cards and cancelling any that you do not need.
Increasing Your Odds of Getting a Bad Credit Business Loan
Since banks are more interested in the risk of the individual rather than the productivity of the business, you should consider an alternative lender that is interested in your business profits. Show off your business and its potential by creating a business plan that includes:
• The products or services your company provides now and what you are planning to offer in the near future.
• An analysis of the current market for your business, noting any trends and how they may attribute to your future success.
• Your competitors and how you plan on gaining an edge over them in the market.
• Your target consumer and their demographic and psychographic profile as well as how you are able to fulfill their needs.
• A breakdown of your businesses management team and how they contribute to your success. Discuss any need for more staffing in order to meet your business goals.
• Your business goals and the process by which you plan on meeting them. Make sure to include where you see your business in one year compared to what you see as your five year goal.
• The capital you need to reach those goals and what it will be used for. Include your current and projected profits as well as costs.
If you are able to exhibit a business plan that presents it as being viable and based on great ideas, you will have a better chance of finding lenders willing to support it. By taking the time to put your business plan down on paper, you are showing an admirable dedication to the success of your venture. This is the type of commitment many alternative lenders look for when considering a bad credit business loan.
Your Alternatives for Getting a Bad Credit Business Loan
With your business plans for the future clearly defined, you can now share your visions with an alternative lender in order to help persuade them that your business is worth their investment. Depending on your business structure and the amount of capital you need, you can look into any of the following for getting a bad credit business loan:
• A Merchant Cash Advance – This is a good solution for a retailer who makes a lot of credit card transactions throughout the day. The merchant will advance your business the cash it needs, charging you a flat fee as opposed to interest. They will then collect on the advance by deducting an agreed upon percentage at the end of the business day. This allows you to pay back the advance based on what your business can afford to pay, not a pre-determined monthly amount.
• Factor Funding – A business that has a large balance of outstanding account receivables will benefit from factor funding. The lender in this case will “buy” those unpaid debts from you, collect the payments and then refund you the balance minus what was lent to you and their fee. This solves the cash flow problem that many businesses are faced with when they must wait on payments for goods or services that have already been delivered.
• Asset Based Lending – If you are in need of a large amount of cash to expand your business or for day to day operation expenses, asset based lending is a viable option. This is a loan type typically sought by large companies that have expensive machinery, business equipment or inventory that can be used to secure the loan. The money can be used like a loan, or set up as a revolving line of credit, where you only pay interest on the amount you have outstanding at any time. Since the loan is secured, you can expect a lower interest rate than other alternative business loan solutions.
Getting a bad credit business loan should not put you further into debt, or disrupt your business cash flow and goals for the future. Those listed here are all designed to help a business to continue to grow by providing them with capital at a nominal cost. Use your business plan as a base, and you will be able to find the right type of lender who can help you in getting a bad credit business loan.