Bad Credit Small Business Loans

By:  LoanMan

It’s hard to get a small business loan with bad credit. Options are limited, and borrowing is more expensive. Don’t give up though.  Read this article and pick up some valuable pointers you may not have thought about. If you’re trying to get a loan with bad credit, do some homework before you get a loan. It’s easy to get into expensive traps, and there are a few things you can do to improve your chances.

Do you really have bad credit?

Your credit may not be as bad as you think. If you’ve been told that your credit ruined your chances of getting a loan, make sure it’s true. There may be errors on your credit report. Once those are fixed, things may look very different to lenders. Before you get too worked up, find out exactly what your credit score is. You may be surprised to learn that what you’ve heard about bad credit scores is not entirely true. Very few businesses have perfect credit scores. When you dispute charges on a vendor bill, and it goes to collection, you have some recourse to work with the creditor and have the collection taken off your record.  If your credit is truly bad, here are a few ways to try getting a bad credit small business loan.

Visit Credit Unions

Credit unions may be more willing to offer you a loan with bad credit. They’re more willing to look at you personally – as opposed to just looking at a credit score and the loan application. If you sit across the desk from a human being, you’re more likely to get a loan with bad credit.You must have a sound business plan, containing a section on how you will improve your credit. Often, the loan committee for a credit union is made up of local business people, along with credit union officers. That is much better than having your loan application shipped off to a branch office where no one knows you.

Try Peer to Peer Lending

Peer to peer lending services are a good option for getting a loan with bad credit. Instead of borrowing from banks (with rigid rules and higher overhead costs), you can borrow from individuals. These services are available on line. They may be more sympathetic, but they’re not looking to lose their money. The same rules apply to peer to peer lending. You must have a sound business plan, containing a section on how you will improve your credit. The advantage to peer to peer lending is that, often your peers are in the same type of business.  They know the market and your type of business. Be prepared to pay more interest, though, and possibly a small percentage of your company.

Tap Friends & Family

Most peer to peer lending sites allow you to borrow from strangers. However, friends and family may be your only option for finding a loan with bad credit. They know you, and may be even more willing to take a chance. If you borrow from friends and family, do it properly so everybody’s protected. Have an attorney draw up documents explaining terms of the loan, interest rate, default provisions and other items that the attorney feels are important.  Even though this is family, treat it like a business deal…and pay it back!

Use Family Collateral

If friends and family can’t lend to you, they might still be able to help. You may qualify for a loan with bad credit as long as you have a co-signer. If you’re having trouble getting a loan with bad credit, you family may need to put up collateral. By pledging something of value, your lender knows you and your family are serious and the lender has a better chance of collecting some money.