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If you need additional financing to grow your business, you might be interested in applying for a business loan. If you have poor credit score, attaining a business loan can be hard and requires additional consideration. You will need to determine who will provide you with financing, despite your low credit score, and how it all affects your business in the future.
Before you apply for a business loan, make sure you are prepared to answer the questions below. These questions will help you determine if this is the right time for you to get a bad business credit loan.
Do I have any collateral that can help offset my bad business credit?
If you have a house or another big-ticket item that the bank can use as collateral, your business’s credit score will not be as big of a factor. This is one of the first questions a banker will ask you about so make sure to determine if you have any items to put up as collateral.
If you do not have collateral to put up, you might benefit from applying for a bad credit business loan through an alternative lender. This method might not require you to put up collateral and some lenders are willing to work with businesses even if they do not have a high credit score.
What is my business’s credit score?
Before you talk to a bank or lender, you need to know what your business’s credit score is. If your score is too low, it might not meet their requirements and you will be just wasting your time. By knowing what your credit score is it will make the application process easier, if you need to guess what it is, you will be wasting time and could slow down the process of getting approved for a loan.
Is my personal credit score enough collateral?
If you have good personal credit score, it can help offset your low business credit score. Having a good personal credit score can be an asset to show that you are reliable and trustworthy.
Can I wait for a few months or year to build up my business’s credit score?
If you can improve your credit score, you will find lower interest rates more flexible payment terms and an overall better experience. Having a better credit score will allow you have an easier application process, and you will be in a better financial situation when you go to repay your loan.
Is my business in trouble because I have unpaid customer invoices?
You can borrow business loans that turn your unpaid customer invoices into physical cash. When your business’s credit score is low and you have no major collateral, lenders look to your customer base to gauge the quality of clientele you work with. If your customers do not pay their invoices, you do not have many other ways to receive the money that you have earned.
Do I need a large lump-sum or can I borrow money in increments?
Applying for a new business credit card is cheaper in the long haul than a large lump-sum of cash. Be prepared to show your banker or lender why you need cash in a short amount of time. These details will help you explain why you need a loan instead of another product.
Can I turn to investors for business financing?
Ask if there are people willing to invest in your business for a return on investment within a specific time frame. If you are unable to repay your debt, you can damage your relationship with the person that gave financing, especially if it is a friend or family member.
Can I get funds from micro-lenders rather than a loan?
Your lender might ask you if you have considered investors, micro-lending, and other avenues for cash influx. Peer to peer lending usually deals with lower amounts of money, you can still get a decent amount of cash from this method of borrowing.
