How To Get A Business Loan With Bad Credit

Cash may be derived from a variety of funding sources that are needed for a business to operate. While an abundance of sales would be ideal, an entrepreneur may occasionally need to obtain external financial support. Some startup companies and existing firms may want to explore how to get a business loan with bad credit.

Perform a Personal Credit Check

Banks and other financial institutions often require a business owner’s personal guarantee that a loan will be repaid. Therefore, an entrepreneur who wants to get a business loan should know about the items that might appear on his personal credit report.

The Annual Credit Report website provides a free service that a consumer may use to view her credit file from Experian, Equifax or TransUnion.

After viewing the credit report, it is a prudent idea to pay off any small-balance debts, past-due credit cards or collection accounts.

Also, consumers may file a dispute online with the respective credit reporting agency for any erroneously reported items.

Gather Important Business Documents

Certain records are requested when an entrepreneur wants to get a business loan.

A financial institution may want to verify that a business is properly licensed, and to determine whether the person who is applying for the loan is listed on the Articles of Incorporation.

A folder that contains a company’s business license, proof of ownership and the names of the key decision makers should be readily accessible.

Organize the Company’s Financial Records

Prior to issuing a business loan, a lender may request a variety of financial records, such as recent bank statements, tax returns for the past few years or details about any company-owned investments.

If available, compile a list of creditors or landlords that the business has paid as agreed.

Apply for an Employer Identification Number From the Internal Revenue Service

An EIN, also referred to as a tax ID number is an important step toward obtaining a business loan with bad credit. An entrepreneur can strategically build credit for a new business or for an existing enterprise.

By partitioning a company’s credit from an entrepreneur’s personal credit records, the path toward getting a business loan may be a lot easier.

Register With Dun & Bradstreet

Dun & Bradstreet maintains commercial account information for millions of businesses.

Many financial institutions will extend credit or a business loan to companies with favorable trade references that report to Dun & Bradstreet.

Also, it is wise to ask any creditors or vendors, where timely payments are made to share the information with Dun & Bradstreet. If the creditor agrees, the favorable payment history may be instrumental toward obtaining financing for the company.

Consider Alternative Financing Methods for a Business Loan

If an entrepreneur has bad personal credit and bad commercial credit, the path toward traditional financing will probably be very challenging. However, a variety of alternative financing methods may be used to secure a business loan.

Perhaps, the business might qualify for a cash advance. This type of business loan is based on a company’s receivables versus relying upon the owner’s credit strength.

If nothing seems to work toward securing a business loan, an entrepreneur can speak with her banker about obtaining a secured line of credit.

For instance, a bank deposit of $500 or $1000, could enable an entrepreneur to get a business loan that is equal to the respective deposit amount. The bank will usually place a hold on the deposit until the loan is fully repaid. With a good payment history, subsequent loans might be available without a security deposit.

Summary

Lenders generally want some type of assurance that a business loan will be repaid. The decision to extend a business loan is largely based on credit history, physical assets or a company’s cash flow.

A merchant processing system is equipped with software, which may be used to quickly obtain financial records, such as a company’s daily, weekly or monthly sales volume.

Valued Merchant Services offers an array of secured card processing equipment.

Contact us today to speak with a payment industry expert.

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