The honest truth is this: having a bad credit score doesn't mean it's all over for you!
If you're an entrepreneur with a less-than-average credit rating, you are still able to secure yourself a loan, it may just take a little extra leg-work.
Small Business Loans with Bad Credit
However, there will be a few hurdles to clear, such as a higher interest rate and proving your reliability to a lender.
Securing small business loans with bad credit just means you need to know where to look - and large, commercial banks are not the place.
In this blog, we outline the parameters of bad credit and the types of small business loans you could qualify for, even with a bad credit score!
https://youtu.be/YAl5Y9CZVvw
The reality is that if your personal credit score is below 650, you will not be able to secure a business loan from most major banks.
Large banks which qualify at having over $10billion in assets are known to reject 3 out of 4 business loan applications.
Many are notoriously frugal when it comes to lending, most especially if your credit score leaves little to be desired.
The government operated Small Business Administration (SBA) offers small business loans with bad credit.
Government support of the SBA allows them to take bigger risks on who they lend to, making small business loans with bad credit a possibility.
But ultimately, if you aim at starting a business with a bad credit score, you are unfortunately at a disadvantage.
In order to secure any form of financing for your start-up, you have to rely on a personal credit score -- a portal into your financial history.
Even if your business has taken off and established its own form of credit, lenders will still look into a personal credit score.
Despite the limitations of a bad credit rating, all is not lost! Small business loans with bad credit are not out-of-reach.
Basically, your credit score is a number which reflects how reliable you are as a borrower of money.
The higher your credit rating, the better your chances of securing a business loan.
One of the easiest ways get into borrower's ''bad books'' is by failing to fulfill credit responsibilities.
Some of these include skipping repayments on a loan, late payments on a loan, failing to pay back credit card debt, filing for bankruptcy and more.
Typically, credit scores range from 300 - 850. If your credit rating sits below 620, you score is considered undesirable to many lenders across the board.
But there are still ways and means of securing a small business loan with bad credit.
In order to get the ball rolling on your loan application, you must present a lending institution with the following:
These documents are used to prove your reliability as borrower and are an important part of a lender's decision-making process.
Here are the different types of loans available to those with a less-than-average credit rating...
These types of loans operate the same way as bank loans, only they are not granted by traditional banks.
Alternative types of lenders will offer microloans, such as the Small Business Administration or a credit union.
Typically, the size of the loan granted is much smaller than those offered by traditional banks, hence the term microloans. An amount of $50,000 or less is the standard amount.
Opening a credit card in your business's name work as a double whammy.
With a business credit card, you're able to spend money on your business, and improve your credit score when making regular payments on the credit card.
With a business credit card, you're offered a continuous line of credit, allowing you to pay back as you spend.
However, it is important to stay on top of monthly balance payments, otherwise, the interest incurred on this amount can add up very quickly.
This form of credit is based on projected business turn over each month. The lender will give you an advance based on future revenue or credit card sales.
This type of loan is also known as a business cash advance, and is ideal for businesses with cash flow issues.
These loans are generally offered at $10,000 or less.
FYI: merchant cash advances are loaned with high-interest rates, so you must ensure you can meet the repayments of this loan.
These loans are usually available from online lenders and are ideally suited to businesses with an established financial history.
If you're a start-up business, with less than two years' operation, you most likely won't qualify for this type of loan.
Online lenders are relatively prolific, so make sure you ''shop around'' for the best loan limit and interest rate to suit your needs.
Small business grants are worth the extra leg-work if you have to time and energy to pursue one!
Essentially, a grant is given to your business freely, without having to repay anything. However, grants can be very niche driven, offered only to very specific industries.
In order to successfully apply for a grant, certain criteria of your business will be scrutinized, including demographics, industry type and location.
If the grant is offered to your business, you are generally given strict guidelines on how and when to spend the money by the grant provider.
Failure to follow these guidelines may result in your business having to repay the money to the grant provider.
Our team at SBA Debt Attorneys is on your side. We aim to solve your SBA debt dilemmas with compassion, clarity, and professionalism.
No matter how difficult or daunting your circumstance may seem, our experienced attorneys can assist in erasing your debt.
If you have questions and concerns regarding federal agency matters, SBA letters, SBA demands and more, contact us at www.sba-attorneys.com or at 1-888-756-9969 for a FREE initial consultation.
Millions of Dollars in SBA Debts Resolved via Offer in Compromise and Negotiated Repayment Agreements without our Clients filing for Bankruptcy or Facing Home Foreclosure
Millions of Dollars in Treasury Debts Defended Against via AWG Hearings, Treasury Offset Program Resolution, Cross-servicing Disputes, Private Collection Agency Representation, Compromise Offers and Negotiated Repayment Agreements
Our Attorneys are Authorized by the Agency Practice Act to Represent Federal Debtors Nationwide before the SBA, The SBA Office of Hearings and Appeals, the Treasury Department, and the Bureau of Fiscal Service.
Client’s small business obtained an SBA 7(a) loan for $750,000. She and her husband signed personal guarantees exposing all of their non-exempt income and assets. With just 18 months left on the maturity date and payment on the remaining balance, the Great Recession of 2008 hit, which ultimately caused the business to fail and default on the loan terms. The 7(a) lender accelerated and sent a demand for full payment of the remaining loan balance. The SBA lender’s note allowed for a default interest rate of about 7% per year. In response to the lender's aggressive collection action, Client's husband filed for Chapter 7 bankruptcy in an attempt to protect against their personal assets. However, his bankruptcy discharge did not relieve the Client's personal guarantee liability for the SBA debt. The SBA lender opted to pursue the SBA 7(a) Guaranty and subsequently assigned the loan and the right to enforce collection against the Client to the SBA. The Client then received the SBA Official 60-Day Notice. After conducting a Case Evaluation with her, she then hired the Firm to respond and negotiate on her behalf with just 34 days left before the impending referral to Treasury. The Client wanted to dispute the SBA’s alleged debt balance as stated in the 60-Day Notice by claiming the 7(a) lender failed to liquidate business collateral in a commercially reasonable manner - which if done properly - proceeds would have paid back the entire debt balance. However, due to time constraints, waivers contained in the SBA loan instruments, including the fact the Client was not able to inspect the SBA's records for investigation purposes before the remaining deadline, Client agreed to submit a Structured Workout for the alleged balance in response to the Official 60-Day Notice as she was not eligible for an Offer in Compromise (OIC) because of equity in non-exempt income and assets. After back and forth negotiations, the SBA Loan Specialist approved the Workout proposal, reducing the Client's purported liability by nearly $142,142.27 in accrued interest, and statutory collection fees. Without the Firm's intervention and subsequent approval of the Workout proposal, the Client's debt amount (with accrued interest, Treasury's statutory collection fee and Treasury's interest based on the Current Value of Funds Rate (CVFR) would have been nearly $291,030.
The clients are personally guaranteed an SBA 7(a) loan. The SBA referred the debt to the Department of Treasury, which was seeking payment of $487,981 from our clients. We initially filed a Cross-Servicing Dispute, which was denied. As a result, we filed an Appeals Petition with the SBA Office of Hearings and Appeals asserting legal defenses and supporting evidence uncovered during the discovery and investigation phase of our services. Ultimately, the SBA settled the debt for $25,000 - saving our clients approximately $462,981.
Client personally guaranteed SBA 7(a) loan balance of over $150,000. Business failed and eventually shut down. SBA then pursued client for the balance. We intervened and was able to present an SBA OIC that was accepted for $30,000.
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