Just so you get an idea of how important it is in today’s financial world, loan lenders like banks don’t see a person walking into their shop, they see a walking credit score. No matter what kind of loan you’re after, your credit score will dictate in a large percentage whether or not you qualify for such a loan. It’s just as important even outside the loan spectrum and many financial decisions that you make in your lifetime are heavily impacted by your credit score.
But what happens when you really need that small business loan but you have a terrible or just bad credit score? Is it the end of the line for you and your business? The answer is “no”. You can still get a business loan, although you have to be aware of some rules that change in this situation.
There are multiple things you can do or look into when trying to obtain a small business loan with bad credit. Here are the most important and likely to succeed methods of getting financed even if your credit score isn’t very good.
Re-evaluating your needs and asking for less
The more money you ask for, the more your chances of getting approved go down. This makes it very clear that in order to maximize your chances, you have to ask for not a dime more than what you actually need. Wanted to borrow a couple extra thousands just for good measure? Think again, as this implies a lot of numbers moving around and not in a way that does you or your business justice. Asking for only as much as you actually need to fulfill the purpose of the loan is your best bet in this situation.
Considering a secured business loan
While unsecured business financing might be the more popular solution, having bad credit might mean that you don’t qualify for that. Or, even if you do qualify, it’s not for the amounts that will actually help you and your business. The alternative is the secured business loan, which also adds the element of collateral into play. If you add collateral such as your car or your house, not only will you be given a larger loan, but also a smaller interest rate. However there will be a constant threat of losing your valuable assets in case of defaulting on your loan. Some say that it’s a powerful motivator to never fall behind on loan payments, but you should only consider this option if you’re certain that you can pay back in time.
Improving your credit
This sound easier said than done, but it is possible to repair and improve your credit score. For instance, you can start out by taking smaller unsecured loans just so you can pay them back in time, and even with plenty of time to spare before the deadline. Paying back in time and being punctual on your loan payments will help build your credit score so that it is in a much better state when you have to request that big, important business loan.