Can you get small business loan with bad credit

How to Get Small Business Loan with Bad Credit

Intro:

The truth is it can be hard to get a small business loan with bad credit. A bad credit score is a red flag for lenders for obvious reasons. Moreover, if you do not have acceptable collateral, your chances of getting a small business loan are quite slim. However, non-bank loan providers are generally more flexible in funding entrepreneurs with bad credit.

How easy is it to get a small business loan with bad credit?

Every lender will have their own requirements when it comes to approving small business loans. If you have defaulted on a loan in the past, however, it’s not the end of the road for you. Business can be unpredictable and many lenders offer dedicated bad credit small business loans to those that need them.

What types of bad credit small business loans can one get?

If you have a low credit score, most traditional lenders may consider giving you a secured business loan. Secured loans leverage collateral to reduce the lending risk in the event of default. The good news is that secured loans often come with lower interest rates and longer repayment schedules which can be ideal for small business owners.

However, non-bank lenders approve business loans based on the future earnings potential of your business. Compared to secured loans, the interest rates for unsecured small business loans can be higher. However, the application process takes just 10-15 minutes to complete and, the loan is approved within a few hours.

Dos and Don’ts of applying for a small business loan with bad credit:

When researching small business loans, you are likely to come across offers that are too good to be true. Here are some factors to keep an eye out for before clicking on the ‘apply’ button:

Consider accredited lenders only:

It is important that you check the track record of the lender by looking at their website and online reviews.  Check if the terms they offer are comparable to the rest of the market. For example, interest rates, application fees and repayment periods. 

This should give you a fair understanding of the authenticity of the offer and help avoid potential fraud. More often than not, reputable lenders will be registered with the Australian Securities and Investment Commission.

Ability to repay:

Make sure that you review your current obligations before taking on additional debt. If you are considering a floating rate loan, consider the impact on your finances.

Restrict the number of applications to one:

Multiple credit applications in a short span of time are bad for your credit score. It is a good idea to compare different lenders based on specific criteria and shortlist only three. If possible, pare down the list further to one preferred lender.

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