FICO defines bad credit as a score that is lower than 630. It is common for banks to straight out reject loan applicants that have a lower credit score. They view these borrowers as a high risk and expect them to default on payments. If you are one these people then do not worry because there are ways to get small business loan with bad credit.
How is it Possible?
There are certain alternative lenders that make it possible to get small business loan with bad credit. These lenders have a minimum credit score requirement of 500 up to 650. Certain lenders have no requirement whatsoever.
These creditors look at the status of the business and give more weightage to factors such as the annual revenue, recent bankruptcies and years of operation. However there are certain things a borrower needs to keep in mind if they want to get small business loan with bad credit.
For businesses with a low credit score it is highly likely that they will receive a higher APR which includes the interest rate, origination fees and other expenses associated with the loan. Also if a business has unpaid customer invoices they are eligible to receive cash on the invoice and the lender will then factor them in while checking the credit score.
It is recommended that businesses wait a while and work on improving their credit score because then they will not have to get small business loan with bad credit at ridiculously high annual percentage rates and can browse from a number of other options. If the business has not been in operation for even a year and they also have a bad credit score then it is recommended that they apply for a startup loan to finance the business and help it grow.
Other Options
If you cannot get small business loan with bad credit then you can apply for a line of credit that lets you withdraw amounts up to $50,000. But the approval for this line of credit also depends on the credit score and it should be at least 630 to qualify.
One way to improve the credit score is applying for a personal credit card and then use it responsibly to get your personal credit score back up then you can easily get small business loan with bad credit.
