Whether you like it or not, your credit report goes under scrutiny every time you apply for a loan. And when you have a bad credit, your loan application will most likely be rejected. If you want to start a business but you have a bad credit, how can you apply for a loan? Is it possible for a person with a bad credit to get a business loan?
Fortunately, the answer is yes. You can still get the loan that you need for your business, but you have to widen your perspective. You also need to be more resourceful. There are many places where you can go to for loan application. The following are some tips for successfully getting business loans.
Ways to Get Loans for People with Bad Credit
Don’t rely solely on bank financing. With a bad ranking to your name, chances are, you will be rejected. Did you know that bank financing supplies only 25% of the financial needs of startups? This means that many young companies have thrived by turning to other sources to fund their business. Although there are banks that may be willing to finance your startup, they will probably impose a high interest rate. Some banks may even require you to use your house as collateral, which is not a wise idea since your business is new and has not yet given a return of investment. Instead of going to banks, you can go to microlenders or online lending companies. These nonbank financing companies can give you a loan of up to $25,000.
Consider credit unions. If an organization you belong to, such as the company you work for or an alumni association, has a credit union, then it will be easy for you to be a part of it. Credit unions are run completely by their members. They exist to extend financial services to their members. Ideally, after giving the required deposit, you become a member and part owner of the union, making you eligible to apply for a loan. You have more chances of securing your small business loan in a credit union than in a bank because the screening process require no credit checks. It considers your credit history and other personal information.
Turn to family and friends. You may have some bighearted friends and loved ones who are willing to trust you with your business endeavor and lend you the money you need. However, if you will borrow money from them, make sure you do everything properly in order to protect everyone’s interests. Get all the necessary documents and pay your loan according to the terms you agreed on.
Banks and credit card companies are not the only ones you can turn to if you need a small business loan. There are other options, such as those given above, that are willing to lend you the amount you need even if you have a bad credit. Online lending companies can provide you instant access to cash 24/7. Meanwhile, you might also get some help from other sources, such as your family or friends.