How To Get A Business Loan When You Have Bad Credit (2024)

If you are a business owner with bad credit, you may be wondering what types of loans are available to you. There are several options, each with its advantages and disadvantages. A business loan with bad credit is a loan that can be a valuable option for businesses that require financing but find it difficult to obtain traditional loans.

Many lending companies have realized the potential of approving business loans to business owners with bad credit. And so, a whole niche industry was born.

Some of the terms you should check into when looking for a bad credit business lender are:

• bad credit business loans
• secured business loans
• subprime business loans

Finding LEGITIMATE bad credit business loan lenders

Let’s face it: banks generally like working with borrowers with a good history of paying back their loans. And when you have bad credit, no matter the reason behind your drop in credit score, banks will be cautious.

The right lender will be willing to extend a loan. But usually with the following stipulations:

Bad credit business loans tend to:

• Have shorter repayment terms. Our sister company does a lot of equipment financing and unsecured business loans. They can extend credit for 60 or even 72 months to people with good credit. However, for people with poor credit, it usually lasts 36 to 48 months.
• The interest rates tend to be higher than someone with good credit.
• They may require a security deposit or additional collateral.
• The size of a bad credit business loan will vary depending on the lender. Our sister company recently did asecured business loanfor a clue on how To Get A Business Loan When You Have Bad Credit we referred. They got approved for $200,000!

Compare business loans based on interest rates, terms, and features.

Compare interest rates and terms to find the best bad credit business loan. Here are the most important factors to consider:

Interest Rate

When examining interest rates, make sure your comparisons are accurate. Be wary of the introductory rates that banks provide to new clients because they will rise quickly. Short-term loans have higher interest rates than long-term loans, so compare interest rates based on the length of your loan.

Term

The term of your loan is another crucial consideration. Short-term loans are frequently more expensive than long-term loans due to higher interest rates and shorter terms.

How to spot a FAKE bad credit business loan?

Many fake companies will offer loans at unbelievably low rates or say no credit check is required. Knowing a bank or finance company is in the business of making loans that will get repaid.

Does it make sense for them not to check your credit and see how you have repaid others?

Would you blindly lend money to someone who walked up to you off the street?

If the loan is 100% secured by real estate or business equipment, they will look at a business owner’s credit, but they won’t turn down the loan because of the security offered.

In my experience, the people who get scammed don’t do enough research on the company. If you receive a phone call out of the blue offering you an unsecured business loan with no credit check. Never trust them!

I’ve never met anyone who got funded by ANY of these companies. And they ended up LOSING money because they had to buy an “insurance policy” for the loan.

Just remember, if it sounds too good to be true.It usually is!

If you have bad credit, there is something you can do to increase your credit score before applying.

1. Pull your credit report and see if there are errors.If so, fix them by sending in a credit dispute letter. The credit reporting agency will remove the item from your credit report after 30 days of the investigation if you are right and it was recorded improperly. Make sure you get all three major credit reports. Not all agencies will immediately correct a problem just because one does.
2. Pay down your credit cards!It is a quick fix we have used in the past to increase a client’s credit score before applying for a loan, especially if they are using more than 30% of their credit.
3. Increase your credit limits.If you can’t pay off your credit cards, call your credit card companies and get a credit limit increase. Ask for a large enough increase to put your usage under 30%. Once this occurs, your credit score will go up within 30 – 60 days.

Just because you have bad credit doesn’t mean you can’t get approved for financing. It just means you have to take the time to find the right company.

Also, remember to write a letter of explanation to explain to the lenderWHYyour credit score is low.

Be prepared to provide a security deposit or additional collateral.

If you’re looking for a legitimate bad credit business loan lender, perform your research and look for lenders with a good reputation and a long history in the industry. Also, make sure to inquire about the lender’s lending terms and how they will protect your interests. Finally, always carefully read the borrower agreement before signing it to ensure you understand the terms and conditions.