When you start a business, there’s a very good chance that you are going to need some extra capital. Whether you need money to hire and train employees, to pay for office space, or to buy inventory, it seems there is always something to spend money on when you start a business.
The great news is that there are so many options out there for finding the funding you need, from small-business loans to lines of credit. But what if your credit isn’t exactly stellar? Can you still get a small-business loan with bad credit?
The answer is yes, but it may be more challenging than you think. Here are a few things you can to do help you get a bad credit small business loan.
Come up with a strategy
Before you apply for the loan, sit down and think about your financial situation. Be realistic. What is your current financial situation? Why do you want the loan? How do you plan to pay it back? Is there a way to get the funding you need without a loan, such as borrowing from a friend?
Make an appointment with a lender
After you’ve considered the whole financial picture, if you’ve determined that you do need to try to secure a loan, make an appointment with a potential lender. Be honest with them about your situation, and see what they can do.
Explore government options
In some cases, you may also be able to get some funding to start up your business. Depending on where you live, sometimes the government will give you funding you need even if your credit isn’t the best.
Secure your loan
If you don’t have the good credit history to secure your loan, you may be able to secure your loan with some collateral like using a buddy as your guarantor. Secured loans are a good option for those with poor credit because the risk to the lender is mitigated by the collateral. Discuss with a potential lender what type of collateral they would be willing to accept, as this will vary by lender and possibly by your situation. And be sure you really do need the funds if you are going to secure your loan with something like your home, because you default on a loan that is secured, you could have the collateral seized.
Consider a cash advance
If you need a quick influx of cash, a merchant cash advance could be a good option. How this is works is the lender gives you the money you need under the agreement that you will pay them a percentage of your credit card or debit card transactions until the amount of the loan is paid off.
Think outside the box
Alternative lenders may be a better option for your loan if you have been unsuccessful in asking for a loan from a traditional lender such as a bank. Private lenders often have more lenient qualification rules than banks. They will tend to be more willing to work with you and your situation, even if you don’t have the best credit history.
Most importantly, don’t give up. It may seem challenging and maybe even impossible to get a loan if your credit isn’t the best, but don’t lose hope. There are so many options out there for loans, there is almost always a solution. Just be sure that you are able to pay back any loans you obtain, particularly a secured loan, because defaulting on it can make an already precarious financial situation worse.
Small business loans are essential for many small business owners. Whether you like it or not, it takes money to start a business! Do your homework, explore your options, and be realistic about your situation.