Getting a business loan with bad credit – Is it possible?
Having bad credit is universally bad, but when it comes to getting a loan, it gets a whole lot worse. It is believed by most that it’s impossible to get a loan if you have bad credit. But while it is indeed a lot more difficult than when you have good credit, it’s not impossible. If you find yourself in this position, know that you have options. Even if they are fairly limited, they exist and can help you get credit and help out your business. So, want to know how to get a business loan? Here are the options you can find the most success with.
The first thing you have to do is know who will lend money to you. If you have bad credit, you won’t see a line forming outside your house with institutions fighting over who gets to lend you money. However, there are still a few options available to you.
This might surprise you, but banks remain one of your best shots at a loan when you have bad credit. At the end of the day you are still a customer, and they need to give out loans to upkeep their own business. However, having bad credit means that they are taking a much higher risk by giving you a loan, so expect some headache-inducing interest rates. On top of that, getting a loan might also require you to put up some goods as collateral. This isn’t ideal, but it’s understandable how the bank would want to protect their investment.
Microloans are not that different from your typical bank loan, but there are some things that set them apart. For starters, a microloan is something you usually get from another type of lender. You can get it from a credit union or third-party lender, and its name pretty much gives away the main trait. Microloans are fairly small in size, thus the name. But if the amount you can get with a microloan is enough for your needs, it can be a great solution because its size also influences the interest rate. You will be able to get away with a much smaller interest rate by borrowing a small amount.
Business credit card
This option has the potential of not only satisfying your financial needs but also working towards repairing your credit. Getting a business credit card means that you will enter a borrow and repay cycle but since you can get money from your credit line at any time, in the amount you need, you will have an easier time paying back what you owe. This can lead to a large number of smaller loans when using your credit card, which you can repay on time. Ultimately, this builds up your credit score as well.
Getting a business loan is not a shut door if you have bad credit. You can still get the money you need, but you’ll just have to jump through a few extra hoops or be ready to make some compromises.