No lender will risk lending you if you don’t prove your ability to repay the funds. Before taking a look at your application, lenders may ask for the information like credit history, collateral and business experience. So, how to get a loan with bad credit?
Fortunately, there are a few ways you can secure a small business loan even with bad credit. Let’s find out what they are.
Find out what lenders are looking for
You should find out what the average lender is looking for when they audit your application. Every lender may have their own slightly different approval method but their fundamentals are more or less the same. So, be aware of them.
Below is what most lenders want to see when reviewing your application.
- Lenders prefer borrowers their debt is under control.
- Lenders want to see your revenue is high and growing consistently.
- Your cash flow must be well managed and high.
- Lenders like borrowers meet at least the minimum borrowing requirements.
The basic requirements of most lenders
- You must have been in business for anywhere from 6 months to 2 years.
- Most lenders will require you a minimum monthly revenue of $10,000 or more.
- If you are behind on payment with another lender, chances are your application will get rejected.
Review some potential funding options for those with bad credit:
Also known as peer-to-peer investing, it enables individuals to get a loan straight from other individuals rather than financial institutions. Usually, it is an unsecured loan. The interest rate for this type of loan is set by the lenders or company facilitating the transactions on the basis of the credit score of the borrower.
Unsecured Business Loan:
Though interest is often higher in this type of loan, it doesn’t use traditional collateral to guarantee the loan. The interest rate may go up to $2 million depending on the lender and approval amount.
Find a partner
If you have a strong business plan that has high growth potential, there is a good chance you can attract a partner with a good credit score who can apply for the loan. You and your partner will cooperatively sign the loan.
On the basis of how you agree to service the loan, both you and your partner will be partially responsible for the loan repayment.
Gather all your important documents
Once you have an idea of what loan options you have, it is time to put together all the necessary documentation. Since every applicant is different, lenders may request a particular document from you. Get the following documentation in order.
- Proof of business ownership
- Profit and loss statement
- Business licenses
- Voided check
- Property lease agreement
- Driver’s license
- Bank statements
- Debt schedule
Gathering all your documents is added benefit that may speed up the approval process.
So, these are a few tips that can help you get a small business loan with bad credit. To get a quick loan at a low-interest rate, approach a reliable financial firm that especially helps small businesses or startups secure capital.