It is a common fact that businesses would not run as well without capital. Even with a fixed
investment for your mini-business, there are still unforeseen expenses that crop up from
time to time. The only way to solve this problem is to provide small business loans. But is it
possible for someone who has a bad credit rating to qualify for such financial assistance?
Yes they can!
It is true that having a bad credit rating can hinder the possibility of applying for a financial
loan to help your small business. Many traditional and conservative financial institutions,
such as banks, only accept people with good credit ratings and avoid others. But this is no
longer the case today.
Secured and unsecured loans
Considering the number of financial lenders in the market, many remain competitive by
offering small business loans despite their bad credit. These loans come in two basic forms:
secured and unsecured.
Secured loans are financial aid that comes with collateral as collateral, which can either be
in residential or commercial property or in assets of equal value. Unsecured loans are the
opposite; lenders will give you the financial assistance you request without any collateral,
which can be helpful if you don't intend to put your assets at risk.
Secured loans, however, allow you to lend larger amounts unlike its counterpart at lower
interest rates and better payment terms. Unsecured loans usually come with a much higher
interest rate and much stricter payment plans.
Additionally, unsecured loans require thorough credit checks and insurance before you can
be accepted. Since this type of loan is very risky, especially from the lenders' perspective,
they need to maximize the possibility of recovering what is owed if something goes wrong.
However, this can be easily accomplished by approaching the SBA or the Small Business
Administration for assistance. This organization will act as insurance for the lender
regarding the unsecured loan despite your bad credit.
Even if you have bad credit, you can easily get a small business loan by having documents
ready that will testify to the financial stability of your business. If your business earns
significant income, you can provide financial statements such as balance sheets and income
statements to prove this fact.
Looking for a lender
When looking for a lender for a small business loan with bad credit, there are a few areas
you need to consider before proceeding. First of all, you need to keep the terms of the loan
in mind before getting one. Consider interest rates and payment terms if you can afford it.
This is usually the case when you go for secured loans and use your properties as collateral.
You should keep in mind that non-payment of these loans can cost you your assets, as well
as your business.
Also, it is a great opportunity for you to boost your credit score while opting for the bad
credit loan. Try to find one with payment methods you can easily afford. Prompt payment
for these can boost your credit scores by a notch, leading to much better financial help in the
near future.
