All businesses start off on a clean slate without credit. However with time, some businesses find themselves wallowing in bad credit business loans. Bad credit occurs when businesses owners fail to make the right choices with respect to credit as well as other financial accounts. Such choices include failing to make timely payments on bills, not knowing which bills to report to credit bureaus, taking too much debt and managing finances poorly. Bad credit becomes a nightmare when you need to get a business loan because creditors view you or your business as highly risky. However, there is something you can do to access the additional capital you need to grow your business. Here are practical things you need to do to access a business loan if you have bad credit:
- First, make a loan application attempt
Even though you have bad credit, you should not give up on applying for a business loan from your financial institution. This will enable you to know whether you your credit worthiness is high enough. However, if your financial institution denies you a small business loan, do not give up. There are numerous lenders that give personal loans. As a matter of fact, most lenders specifically cater for applicants who have bad debt.
- Prepare adequately to make your loan application
Whether you are seeking for a loan from a small financial agency or a big bank, ensure that you prepare well to make a positive impression to the lender. Anticipate that your lender will request for your crucial documents like business’s credit report, financial statements, your personal credit score, tax returns, a business plan complete with cash flow projections, bank statements as well resumes for your business’s management team. Be ready to explain why you need the loan, how it will be utilized and which other debts you already have. You will be asked to complete paper applications so be ready to do so.
- Opt for special loans for small businesses
If you don’t get a loan from lenders, consider turning to special loans designed for small businesses. To access such loans, look out for economic development agencies and non-profit organizations that offer low-interest loans to owners of small businesses. These state or local agencies often target individuals who are not able to access loans from mainstream financial institutions.
- Approach smaller financial institutions
Rather than going to large financial institutions that have strict policies guiding their lending procedures, approach smaller banks, locally or regionally or even credit unions. Often, such institutions are more open to working with small businesses that are struggling with bad credit. Instead of sending an online application, visit these institutions in person. A personal visit gives you an opportunity to meet the lender so you present your case as to why you need the loan and demonstrate how your business is worth the institution’s investment.
- Ask for a basic credit card for business
If you are unable to get a business loan from any agency or institution due to your bad credit, apply for a credit card for business. With the credit card, you will get capital, which will ideally work as a loan. Also, the credit card gives you an opportunity to redeem yourself by using it responsibly so that your credit worthiness improves over time. When this happens, you are more likely to qualify for a good business loan. Be sure to pay bills on time to enjoy these benefits later. When applying for the card, avoid going for fancy rewards as those will require you to have good credit scores.