It’s not unheard of for individuals to rely on lending institutions to get out of a financial pinch. If your source of income is your business and it’s going through a tight spot, getting a small business loan can be the only available lifeline. The unfortunate news is that a bad credit score can be a serious barrier to your request for a loan.
To help you navigate such a difficult maneuver, we’ve created a guide that should help you understand how you could get a small business loan without having good credit.
Short-Term Loans
If there is a miniature version of conventional long-term loans provided by lending institutions, it is short-term loans. These loans may provide you with the same total amount or value, but the difference is in how challenging the conditions are going to be. Expect to face more obstacles along the way if you’re used to getting long-term loans by banks because of how the schedule of repayment can be much shorter in short-term loans.
The basic foundations like the principal, interest, and payment schedules may share some similarities, but expect the schedules to be less than 18-months, based on the principal and funding potential. You may be required to put in collateral or agree to higher interest rates than usual if you have bad credit.
Equipment-Based Financing
If you’re in a line of business that requires certain equipment to operate, upgrading or purchasing new equipment is a pretty necessary step. If you’re wondering how to get a small business loan with bad credit, the good news is that you can use the equipment to secure financing as well.
Using the equipment itself as collateral is the reason a lot of business owners with bad credit can secure the financing without being a risk in the eyes of the lender. The lender can immediately pull the equipment that they are providing for you, whether you’re leasing or purchasing it, once you default on payments. You may need to put in a little down payment with some lenders if you have bad credit.
Line of Credit
Lines of credit are not like loans, where there is a set amount that you and the lender agreed to. Instead, an approved candidate for a business line of credit receives permission to spend funds as they need from a certain account with a set limit. That said, business lines of credit are similar to business credit cards since you can withdraw any specific funding that you need for your business and pay the interest for that specific amount.
If you have bad credit, you may be required to pay interest on a weekly schedule. Most people with bad credit scores are able to secure business lines of credit by offering collateral to offset the risk of their reports.
When it comes to business opportunities, things happen so quickly that wrong timing can sometimes mean kissing the opportunity goodbye. Having bad credit stops you from planning the expansion of your business or starting your dream business can leave a very bad everlasting taste in your mouth for years to come. So make sure you use our simple tips to get through it.
Interesting related article: “What is my credit score?”