How to Get a Business Loan with Bad Credit
If you are having difficulty getting a business loan, you should know that the approval rate for business loans from large banks is only around 25%, so you have plenty of company. The good news is you have other options for raising capital to keep your business healthy and thriving. If you want to get a business loan with bad credit, you may have to get somewhat creative, but it can be done, through alternative lenders, for example.
Following are some strategies for obtaining a business loan. The first two, knowing your current credit status and writing out your business plan, are smart for every business. The others will apply depending on your particular situation.
Know What Your Starting Point Is
Do you know what your credit score is? Finding out is important, even if it is low, so you’ll know what you’re dealing with. The lower your score, the more difficult it will be to obtain a business loan, and the higher the interest rate you’ll pay if you do get one. You can find out your credit score online for a fee. Watch that you don’t accidentally sign up for monthly credit score monitoring, which will entail a monthly fee, unless you want this service. Your credit score will make a difference if you need to get a business loan with bad credit, so you need to adopt financial practices that improve your score over time, like paying bills on time and paying more than minimum monthly payments on credit cards.
Write Out Your Business Plan
You’ll have to create a smart, strategic business plan to get a business loan from most lenders. But it’s something you should do anyway to help yourself stay on course. In this document you’ll spell out your plan for growth, market analysis, how you’re currently generating revenue, and fact-based projections of revenues. If you are not sure where to begin in creating a business plan, don’t worry. There are plenty of online resources you can use, many with downloadable templates to get you started.
Microloans can be a terrific source of funding for new, small businesses. They differ from traditional bank loans in that they’re smaller – on the order of a few thousand dollars – and your credit rating and collateral are not the major determinants of whether you’ll get financing. Microlending is often based on the strength of your business idea and plan, and this is another good reason to have a strong written business plan prepared. Specialty microloan programs exist to assist minorities and women, and you may have access to provincial microlending programs as well.