Imagine running the business of your dreams, but the business is quickly running out of money. Before you close your doors, consider if you can get a small business loan.
Then, you can push through a slow period, and you may bounce back to success. Keep reading to learn how you can get a loan for your business, even if your credit score isn’t great.
The first thing to consider is how much money you want or need to borrow. It also helps to calculate how much the loan will cost you with interest to make sure you can afford the loan.
If you have bad credit, go with the smallest loan balance you can. You might have an easier time getting a smaller business loan even if your credit score is low.
After you pay off your first loan, you may be able to get a bigger small business loan. Then, you can slowly work your way up to getting all of the funding you need.
Another thing to keep in mind is if the bad credit comes from your personal or business credit score. Maybe your personal credit score is relatively low, but your business is doing much better.
The business’s credit score might be high enough for you to get a loan with no issues. Review the credit report for both yourself and your business to see which is better.
Then, you can get the type of loan that you’re more likely to qualify for. Depending on how you’ll use the loan, a personal loan is the perfect way to fund a business.
Now, some business loans may come with higher principal balances. However, a small personal loan might be all you need to get through an emergency.
If you have any business partners, meet with them before you apply for a small business loan. You can discuss whether a loan is the best option or if you have access to other types of funding.
Assuming a loan is your best bet, you can also ask your partners about their personal credit scores. Even if your score is low, your co-founder might have an excellent score.
In that case, you could ask your business partner to apply for a personal loan to put into the business. You can use your money or the business’s money to pay back the other partner.
Maybe you don’t have a business partner, or if you do, their credit score isn’t much better than yours. One of the best ways to get a loan is to find someone willing to be a co-signer.
The cosigner should have a decent or excellent credit score. You should also choose someone you trust and who trusts you because they’ll take on the same repayment responsibilities as you.
Having a cosigner can make lenders feel better about giving you money. Because of that, you may not only get a loan at all but potentially with better terms than you could get on your own.
If you can’t get a cosigner, you could also talk to the lender about putting up collateral. You could offer one or more personal or business assets to give the lender some peace of mind.
In case you default on your payments, the lender can collect that collateral instead. Having the collateral can also make you more aware of the loan so that you don’t miss a payment.
Not all lenders will accept collateral, but don’t be afraid to ask. You can talk to a few lenders until you find one who’s willing to work with you despite your bad credit.
You may have a bad credit score to no fault of your own. If you haven’t recently, check your credit score through one of the various credit bureaus.
Look at the score and the report as well. Scan your report to see if there’s any fraudulent activity or any other activity that you know didn’t come from you.
If you find anything, contact the credit bureau about the issue. They can freeze your credit and look into the situation, which can keep you from applying for new loans.
However, if the bureau discovers the problem, they can resolve it. Then, you may notice your credit score increases, and you can apply for a loan more easily.
When you look at your credit score, you should also look at the credit utilization ratio. This is the percentage of credit you use compared to your credit limit.
For example, if your credit limit is $10,000 and you used $5,000 in credit, the ratio would be 50%. Ideally, your credit utilization ratio would be below 30%.
If you can get it down, you may be able to slightly raise your credit score. Another way to do this is to ask for a credit increase from your current lenders, but don’t increase your spending so that your utilization will decrease.
If you already have loans, do your best to pay them back on time. Making on-time payments is an easy way to help build your credit score for future loan applications.
Depending on the lender, you may be able to set up automatic payments that they’ll deduct from your bank account. If you can’t do that, set up calendar alerts in your phone.
That way, you’ll know when you need to make a loan payment each month. The more you pay your loans on time, the better your chances will be of getting the next loan you apply for.
Whether your business is new or not, you may need a small business loan. You can use the loan to pay for new equipment or to simply get through a dry spell with minimal sales.
Be sure to consider how you can get a business loan with bad credit. It may be difficult, but it’s not impossible if you’re willing to work with others or slowly raise your own credit.
Do you need a small loan? Apply today to get some extra cash.