Bad Credit Business Loans

In most cases, your credit score is the first thing that lenders look at when you approach them for a loan.  However, there are a number of other elements that your credit report reveals to the lenders you apply to.  For instance, it contains information such as:

  • how often you apply for credit
  • the amount of debt you carry
  • your payment history

However, that first impression may not always be accurate despite its significance.  Bad credit scores also result from losing your job and not making payments that you normally would have made on a regular basis.  Or your score may have resulted from some other circumstances that were beyond your control.

Because of this, you should research your credit history and credit score up to 6 months prior to needing a loan.  That will give you enough time to catch any errors on your credit report and get them corrected so your score improves.  Fortunately, a number of resources and strategies are at your disposal which you can follow in order to improve your credit score.  However, if there is not enough time available to improve your score you still have a chance to get financed with certain types of bad credit business loans.

Other Financing Options for Bad Credit

If you have collateral that you can secure a loan with, there are other financing options available such as the following:

  • Asset-based loans – short-term financing for businesses that can secure the loan with their own assets (typical assets are accounts receivable or A/R, equipment, inventory, and real estate)
  • Hard money loans – an asset-based loan that the borrower secures by using a parcel of real estate as collateral
  • Interim bridge loans – a short-term funding option used by companies and individuals until they are able to secure a permanent loan (a.k.a. “gap financing”, “interim financing”, or “swing loans”)

On a side note pertaining to asset-based loans, compared to other types of financing and loans, this funding option can be customized or tailored to meet the needs of the business that is applying for one.  Successfully repaying this type of loan increases future availability and is typically more cost-effective than a term loan.

Additional Information

Unfortunately for many individuals, whether they are aspiring entrepreneurs or not, they are plagued by bad credit resulting from the recent economic and financial crisis.  The reality is that smaller businesses are now having a more difficult time obtaining a loan when they need one, even though they have good credit ratings.  Without a doubt, access to capital or funding is the primary roadblock that many businesses face today, especially smaller companies.

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