Do you own a business and need a good financing option? As it is getting approved for personal financing, business financing requires a good credit score. Unfortunately, many small businesses can’t receive access to business financing.
Many lenders don’t give loans to startup and small businesses, and there are a few reasons why. Startups don’t have enough capital, collateral, and have a bad or no credit score. This makes repayment tricky.
If you own a startup or small business, this doesn’t mean it’s impossible to receive financing. You just have to know where to look for a business loan for your bad business credit. Here’s how to get business loans for bad credit.
Submit a Well-Written Business Plan
Your lender needs to know many details about your business, why you need financing and what you will use the financing for. You can easily convey this information in your business plan.
Your business plan is a document detailing your business goals and the strategies you will use to achieve them.
Your business plan can also (and should) describe the different goals and successes your business already had and how you achieved them.
What else should you include in your business plan? Include your monthly profits, reaching your sales goals, and any improvements in your business profits. This will help convince your lender you can repay the loan.
Research Your Credit Score (Or Lack Thereof)
Your startup likely has a bad credit score or even no credit score. Research your score and what that means.
No credit score means you don’t have any business credit. A bad credit score can mean many things. If your credit score is under 500, look back at your finances and the credit you already have and determine why you have that score.
Knowing why your credit score is at its position will help your lender understand why you’re approaching them with a bad score. In addition, it’s important to know the minimum credit score requirements for a business loan.
Even if you don’t qualify, the business loan lender will have a better understanding of your business financial history. They may be able to advise what you can do to improve your credit score and qualify for a business loan in the future.
Use Your Business Loan to Build Credit
Even though lenders look for a healthy credit score, you can easily use a business loan for bad credit to improve your credit score.
When you make your payments in full every month, the credit bureau will recognize this and will see you as a reliable business.
In addition, the credit bureau likes it when a business has multiple different credit lines.
If you have a not-so-perfect score, explain to the lender you’re using the business loan to improve your credit score.
You may only receive a small loan amount with a high-interest rate. Accept what the lender gives you and make your payments in full.
It’s Not Impossible to Get Business Loans for Bad Credit
Startups and small businesses typically have a bad or lack of credit score. But don’t think same day business loans don’t exist. Bonsai Finance offers a myriad of loans suitable for those with bad credit. Here are some other articles you might find helpful:
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The proper way to apply for business loans for bad credit
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