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.
- 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.
- 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.
- 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.
FAQs
Yes. Some lenders welcome business owners with credit scores as low as 500. These loans focus less on your credit score and more on the strength of your business and your ability to repay the loan. Most business loans for bad credit will have high interest rates and fees.
Can I get a business loan with a 500 credit score? ›
Yes. Some lenders welcome business owners with credit scores as low as 500. These loans focus less on your credit score and more on the strength of your business and your ability to repay the loan. Most business loans for bad credit will have high interest rates and fees.
Can I get a business loan if I personally have bad credit? ›
Some lenders have more lenient approval processes, but you typically need to have at least a 640 credit score to be eligible. If you've been in business for many years or your poor credit is due to extenuating circ*mstances, the lender may be more willing to approve you for an SBA 7(a) loan.
What is the minimum credit score for business loan? ›
Minimum credit score by business loan type
| Term loan | While banks and credit unions typically require a score of 670 or above, online lenders may only require a score of 500 |
|---|
| SBA loan | Lenders offering SBA loans require credit scores between 620 and 680 |
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Banks generally require that you have good to excellent credit (score of 690 or higher), strong finances and at least two years in business to qualify for a loan. They'll likely require collateral and a personal guarantee as well.
What is the easiest SBA loan to get? ›
Thanks to the wide range of permitted loan uses, an SBA Express loan is financing that's easy to approve and is likely perfect for your startup's needs.
Can I get a business loan with a 480 credit score? ›
It is possible to get a small business loan even if you have bad credit. This is because your credit score doesn't matter as much as the overall financial health of your business. Many lenders require a minimum credit score of 500, at least six months in business, and more than $30,000 in annual revenue.
Can I get a business loan with no income? ›
Yes. In general, most lenders require that their borrowers sign a personal guarantee. If you have no revenue, you pose a greater risk to the lender, which means they're even more likely to ask you to sign a personal guarantee.
Do banks check your personal credit for business loans? ›
Lenders check business credit scores, but they will review personal credit if they can't find valuable information from the business credit.
Can you get an SBA loan with no business credit? ›
Some loans also require a business credit check. However, most SBA loans don't have a minimum credit score requirement. “Acceptable credit” is required, though, and most lenders who make SBA loans require good or excellent credit scores.
While LLCs can be started at any credit level, there will be some notable disadvantages for business owners who have bad credit.
Can you get a business loan with a 450 credit score? ›
For most lenders, a bad credit score ranges from 450 to 600. Traditional banks and institutions will rarely fund owners with these credit scores — but you're in luck! Our network of alternative lenders looks at several other factors to approve your business loan application.
Are SBA loans hard to get? ›
Hard to qualify
Although the government guarantee reduces the risk that lenders face when issuing loans to small businesses, you'll still need to meet strict eligibility criteria to get an SBA loan. Typically, you'll need several years in business, strong business finances and a good credit history to qualify.
How much can you get for a startup business loan? ›
Backed by the US Small Business Administration, SBA loans for startups are designed to help business owners grow their companies and cover expenses like equipment. There are several types of SBA loans with maximum amounts ranging from $50,000 to $5 million. SBA loans are backed by the US Small Business Administration.
Why do I keep getting denied for business loans? ›
Poor credit, insufficient cash flow, lack of a business plan and other issues can prevent you from securing a small business loan. It can be disappointing when you get denied a business loan, but a denial doesn't mean it's the end of the road.
Can I get a business loan with personal debt? ›
“Even though you can get a business loan with a heavy personal debt load, most small business lenders will ask that you personally guarantee repayment of the loan in case your business can't make the payment,” Senturia said.
How much loan can I get with a 500 credit score? ›
The maximum amount you can get for a credit score of 500 will depend on the lender. As mentioned, some lenders will consider granting loans up to $10,000. There are other lenders who don't have a minimum credit score.
What is the lowest business credit score? ›
Business credit scores range from zero to 100 and most small business lending companies require a minimum business credit score of 75.
What is a good credit score for a small business? ›
The higher your score, the better your business credit rating. To improve your company credit score, your aim is to get as close to 100 as possible. Here's an overview of what high, medium, and low risk might look like to a lender2. 80 or over: A business credit score above 80 is typically considered excellent.
Do small business loans look at personal credit? ›
No matter how long your business has been around, and how much information is available for others to know, lenders will also look at your personal financial history and your credit score.
