Bad Credit Business Loans
Get your business started, even with bad credit
Unfortunately, financial mistakes can follow you around for years, and bad credit can obstruct a small business start-up. However, the effects of bad credit can be overcome—many institutions offer bad credit business loans, and with a solid understanding of your financial state and how to improve upon it, you will be able to acquire a small business loan with bad credit.
Types of Bad Credit Business Loans
Before you start searching for a loan, conduct a careful assessment of your credit situation. Your loan options can be limited if you have recently filed for bankruptcy, have previously defaulted on a loan or if you have been checking your credit score too often. However, don't get too discouraged about your loan prospects until you have consulted a financial advisor for some helpful business advice and insight into your credit report. Your situation might not be as dire as you think.
A business loan for people with bad credit can come in one of two forms—secured or unsecured. If you get a secured bad credit start-up business loan, your business will act as collateral. This means that if you cannot make your loan payments, the lender can seize and sell your company property to get their money back. This type of loan is available to all borrowers, regardless of their credit histories; shop around online to compare interest rates and payment plans.
Although your interest rate on any business loan with bad credit will be fairly lofty, an unsecured loan is not attached to collateral and will thus bring a higher interest rate than a secured loan. Indeed, the interest rate on an unsecured loan, or business cash advance, can soar as high as 30 percent; if your profits do not rise quickly, you may end up forwarding all of your income to loan payments. The benefit to this type of financing is its liquid nature—even those who do qualify for a bank loan might choose to take advantage of the quick money that comes with a business cash advance.
Applying for Bad Credit Business Loans
Like any small business loan, the application process for a bad credit business loan begins with a well-developed business plan and a confident presentation to the lender. And if you cannot secure a loan from a bank, there are other lending options to explore—you may want to ask family, friends or another personal investor to lend you some capital.