Most people understand that having a good credit rating is an essential part of doing business. Having good credit is particularly important if you need more working capital and are considering taking out a small business loan. Unfortunately, it can be challenging to get approval for a loan if you have a low credit rating.
With that in mind, here are our 7 top tips for getting business loans with bad credit
The top 7 tips for getting a business loan even if you have bad credit are as follow:
- Research Credit Score Requirements of Different Lenders
Take some time to do a little research in the preliminary stages. Find lenders that offer bad credit business loans to businesses with low credit scores. Finding such a lender is particularly essential for businesses with credit scores under 500. Some lenders are more lenient than others, but a credit score below 500 is enough to make most lenders wary of doing business with you.
Don’t bother applying to lenders that would never approve of you in the first place. Focus your efforts on building business credit and applying for a loan when you have a better score. If you need the money as soon as you can get it, then bad credit business loans can be just what you need.
- Put Together a Solid Business Plan
Having a business plan to show the lender will help you secure funding with a low credit score. Prove to the lender that you will use the money smartly, and you can convince them you’ll succeed and pay them back.
You should be prepared to share how much money you make each month with the lender. If you can prove that your business’s finances have improved in recent months or years, your current performance’s positives can overwrite the past adverse performance. Lenders are more willing to work with companies that prove their business is looking good in the future, even if it wasn’t looking good in the past.
For example, you can explain that you will use the money to improve your equipment and service more people, leading to more sales and more significant revenue. This can help convince a lender to work with your company, no matter your current credit score.
- Be Prepared to Pay Higher Rates
When asking a lender for bad credit business loans, pay attention to the rates you will have to pay. Having a low credit score generally means having a higher rate than companies with above-average credit scores. This is because having a low score makes you a higher risk candidate.
You should carefully consider if your business is in a position to pay back the amount or not. If you feel you wouldn’t be able to afford loan repayments and keep your business afloat at the same time, then try a different financing option.
- Improve Your Credit Score
There’s never a wrong time to take action to improve your credit score. If you’re serious about borrowing money despite having a bad credit score, then you can improve your credit rating before applying for a loan. Start by looking through your business credit report. This will show you your current credit score. Check to see if there are any discrepancies in the report. You can get these mistakes fixed, which could improve your credit rating in the process.
Keep in mind that you won’t see a drastic improvement in a day or two. You’ll have to exercise healthy financial habits and show your financial responsibility over time to improve your score significantly. Having to wait can be frustrating if you need money in a hurry, but taking action to improve your credit score is always worth doing.
If you aren’t desperate for financing, then focus on boosting your score before applying.
- Look for a Merchant Cash Advance
A merchant cash advance could be a suitable option for you if you need small business financing but have bad credit.
A merchant cash advance is a way of getting business financing without taking out a loan. It is a form of lump-sum funding offered to you in return for a percentage of credit card sales. Even if you don’t have a good credit rating, you can still get money from a merchant cash advance if you have healthy sales figures.
The lender behind the merchant cash advance looks for multiple deposits of small amounts. They may overlook your credit score if you apply for a merchant cash advance instead of a loan.
- Borrow Money From Friends and Family
Borrowing money from the people in your life can help if you need financing immediately. We usually recommend borrowing money from someone you know. Still, if you know someone who would be willing to lend you money until you can get working capital the traditional way, then you could take steps to improve your business credit without worrying about money. You can then apply for a loan when your credit improves, pay back your friend or loved one, and enjoy having access to traditional business financing.
- Pay Bills on Time
The simplest and most effective way to improve your business credit score – and also your personal credit score – is to pay bills on time (or early). A late payment could be one of the contributing factors to your low credit score. Make paying bills on time a big priority moving forward. Here are some ways to help you get bills paid on time;
- Create calendar reminders
If you’re one of those people who forgets when bills are dues, we recommend creating calendar notifications to be alerted to when due dates are coming up.
- Refine your budget
Do you miss paying your bills on time because you don’t have enough money at the time? If so, refine your business budget, so you have cash when you need it and aren’t waiting for money to come in.
- Take advantage of technology and apps
There is an app for everything these days, including paying your bill on time. Apps such as Timely Bills and Mint can help you get bills paid on time every time.
Talk to Clear Skies Capital Today
We hope that our tips have given you some ideas on how to secure bad credit business loans. We understand that business owners who have financial support are more likely to succeed than those who don’t. Having a business loan helps you to move beyond a bad credit score and create positive growth for your company. Get financial support from Clear Skies Capital and see what we can do for you – and your business.
We help you take control of your business by connecting you to the right lender and financial product. Get in touch today to learn more about our services and see how quickly you get approved for business loans with Clear Skies Capital. Our experts are waiting to hear from you!