How to Get a Small Business Loan with Bad Credit
Starting small business most people find it difficult especially if they don’t have enough funds to cover all possible arising aspects.
Moreover, it is also challenging to do if you decided to take a small loan but have got bad credit history. Surely, nowadays there are tough times for beginner entrepreneurs; however, economic and financial problems should stand in the way of setting up a profitable business.
So here an important question arises: how to get a small business loan with bad credit?
Ways to Get Small Business Loans with Bad Credit Score
Even if everything seems to be OK with your business now, you may need some additional capital during the first several years. Before starting you have to follow several simple steps:
Step #1. Size up your needs and decide whether you really need additional funding.
In case of having bad credit history it might be tougher to repay the loan due to high interest rates.
Step #2. If you need less than $35,000, there is an opportunity to apply for SBA 7(a) loan which has several variations. But before applying you need to talk it over with the lender to make sure there are good odds for you to apply successfully.
Step #3. Look for collateral to secure the loan you are going to take.
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Besides the above mentioned tips there are also several ways how to get a small business loan with bad credit:
- Credit partner. You can find a business partner who will be able to provide you with the needed funds in the form of business credit cards. When opting for this variant you will need to look for a credit partner who has perfect credit history, though as an option you can find someone to invest in your small business and participate in it. However. It may turn out to be risky for your credit partner.
- Bank deposit. There are revenue-based loans that are based on the deposits transferred to the bank account monthly. It is a good way out for those who have bad credit history. Another advantage of choosing a bank deposit option is the time it gets to receive funds – about 7 business days.
- Merchant cash advance, or credit card sales. This funding type provides a borrower with fast cash in exchange for future credit card sales. It is a perfect option for those who have bad credit history but are willing to set up a small business. Though everyone has to be very careful about the provider of the merchant cash advance he/she selects.
Tips to Improve Credit Score to Get a Small Business Loan
Though having bad credit history isn’t the end of the world, it is important to do everything to improve it.
The following tips should be taken into account:
– Try to refuse from credit cards or at least be cautious when using them.
– Pay all your bills strictly on time and sometimes it is advisable to even pre-pay them.
– Make your business fraud-free and profitable. Run your company wisely and choose only professional and experienced staff.
– Also it is advisable to make your business seem serious by incorporating it.