A Route to Getting a Bad Credit Business Loan

Wednesday, May 4 @ 09:05 AM
Charles Mouse - financial expert

You are starting your own business. You need to have a credit loan but you have a bad credit. There are bad credit loans available in the market so your best option is to focus your attention on these. You are not always on the losing end with bad credit loans. You will still be able to get the best possible deal that will suite your needs and one that is affordable too.

As you go on with your business, it is best advised to fix your credit score. It is very important and you know this. A credit score of at least 620 will get you the financing that most banks do not offer. This is limited to several lending companies only.

Therefore, you should have to fix your credit score. Make payments on time. Explore other credit lines that could help you increase your credit score before applying for business financing.

By registering your business, it will have its own identity and its own tax identification number. This will separate your personal credit score from your business credit score. To the least extent this will also affect the level of risk you present to the customers.

In order to boost your credit score, you need to get more affordable credit card business loan. Set up separate utilities accounts for your business like phone bills, electricity and gas bills. Have a business office to ensure separate billing address from your residence. You will be able to get at least two business credit cards this way. You can obtain more financing for your business venture with this set up; just make sure to make payments in time to avoid hurting your credit score.

To prove to the lenders that you are a low credit risk, present them your assets.  You may also use your assets as collateral for securing a small loan. It will assure the lenders security for the loan. You may also look for an option in consignment with a better credit score and you may consider him as an investor or a partner in business.

Use all your options to be able to get a best deal in a bad credit business loan. You will find one that will suit your needs and your budget too.

For each your small business loan approval, requirement must be met before your application will be considered by the lending institution you choose. The given fact is that some lending institutions approve loan applications only from apparent low-risk small business operations while others are able to work with businesses that have a higher perceived risk. Whatever type of business you are in, there are 8 things you must consider in order to increase your chances of having your small business loan approved.

You need to have the reason why you need the loan. The reason will dictate the amount of loan you will be having, what kind of operation it will be applied to, is it the right amount for the proposed business, and is it necessary to acquire the loan for this venture. The lending institution will assess if the amount you want to borrow is necessary for the type of business you have. Your loan amount has to be sufficiently to cover the business operating needs you are proposing. Be specific of the details and the amounts of the loan in your business operation.

Determine how much you need and provide time frame on paying back the loan. Come up with your proposed payment schedule so the lending institution will be able to check it out. Provide also a comprehensive repayment schemes like a monthly or quarterly payment for a $10,000 loan, that you propose to pay back in 5 years.

Lay out the details on how you plan on paying the loan. Provide other source of income other than your regular products and services that can pay off the loan.  For example, inform the lending institution that you have additional profits on the products you make with direct selling that doesn’t incur lots of expenses.

If you are offering collateral for the loan, provide the details of the collateral. This will secure the loan and the lenders will be reassured of your intention to pay back the loan. This will also increase your chances of getting your loan application approved, especially if you are considered as a high risk borrower.

Have a very good business plan. Your business plan will provide the loan applications officer all the information he needs in determining whether or not to approve your loan. All the basic questions about your business will be details and answered by the business plan.

Provide the lender a three-years projected financial statements. If you cannot prepare it yourself have an accountant prepare the documents for you so you can sign it.

Present the lending institution with your updated set of management accounts. There are accounting software program that can aid you in preparing this yourself or your accountant can prepare this document for you.

Lay out a report that shows your creditor with your accounts payable and your debtors with your accounts receivable. Provide this to the lending institution so that they will be aware of your current track record.

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