Bad credit is the culprit in many rejected business loan applications. But it doesn't have to stand in the way of launching your business. Check out these tips for obtaining small business loans with bad credit.
Creditworthiness is in the eyes of the lender. The basis of this valuation comes from lending criteria such as payment history and credit use rate. According to FICO, a personal credit score of 669 or below on a score range of 300 to 850 is fair or very poor.
It's tough to get a loan through a traditional bank if you have bad credit. Banks think you're at a higher risk of defaulting on your loan payments. Even if you get approved, you're more likely to get unfavorable lending terms like a high interest rate.
Traditional banks aside, there are credit unions and online lenders that may have more lenient credit requirements and are often more accessible to those with bad credit. Your odds of getting small business loans with bad credit increase when you choose a non-traditional business loan over a traditional bank loan.
The caveat is that these bad credit business loans can sometimes come with higher fees. Always read the terms of any loan before committing to it.
Have bad credit but not enough time to improve it? Consider securing your business loan from a credit union or an online lender such as Fundera, BlueVine or Kabbage. You can choose from one of the following common bad credit business loan options:
Having a good business credit score can in part make up for a less-than-stellar personal credit score in the eyes of a lender. This way, you can boost your odds of getting a business loan with favorable terms. To build credit for a new business: