How to Get a Business Loan When Your Credit Sucks!

bad creditIn the world of small business finance, business loans and bad credit do not usually go together. Even though federal interest rates have been dropping, which is good news for borrowers, the current credit crisis engulfing America, has caused the banks and lending institutions to be wary about approving loans on bad credit.The result is that only a select group of small businesses with sterling credit profiles will actually be able to take advantage of the drop in federal rates. So what can a small business owner do to get a decent business loan? Actually, more than you may think. The following are several ways that you can make your business more attractive to a lender even if you are dealing with bad credit:

1. Separate your business credit profile from your personal credit. Many business owners are unaware of this option, and they finance their businesses with their own credit. This is a costly mistake, since your personal credit profile will directly effect your business credit, and visa versa. By creating and building a separate business credit profile, you will be able to increase your business’ credibility. The result is better loan terms and an increase in the amount of funding that you can receive.

2. Offer collateral. By offering your assets as security against the loan, you reduce the risk the lender assumes by giving your business a loan. You can offer either your personal assets, such as real estate, or your business assets, such as expensive equipment. Just make sure you assess your own risk in offering these assets against a loan.

3. Get a co-signer. Having someone someone co-sign on the loan will also increase your chances of getting approved, especially if you can get someone who is well-known and established in the community.

4. Request a smaller amount. By requesting a smaller loan, you reduce the risk involved in offering it. Once you have successfully paid back the principle, you begin to rebuild credibility.

5. Get a bad credit business loan. With high interest rates and strict repayment schedules, these loans are typically unappealing to small businesses. But it if you can request a small amount and are able to successfully repay it, you are one step closer to rebuilding your credibility and getting better terms on your loan in the future.

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