More than half of all business owners claim that they go to big banks when they need to obtain a business loan. Unfortunately, the vast majority of these institutions will not provide such loans to individuals who have bad credit, regardless of the success of their companies. Below, you’ll discover everything you need to know about applying for a business loan with bad credit.
First things first, before you start applying for business loans with various banks, take the time to check your credit beforehand. Unless you have a credit score of 650 or higher, you may want to avoid applying for numerous loans at traditional banks. Each time a lender accesses your credit report in an attempt to qualify you, an inquiry appears on your credit history. Multiple inquiries can reduce your credit score even further, so if your credit is already suffering, applying for more loans will just make it worse.
If your credit score is less than 650, your best bet is to seek an alternative lender that can provide your company with the funding it needs. These lenders provide options that do not involve your credit score and instead base your loan amount off of your monthly sales. Not only does this provide your company with plenty of flexibility, but it also ensures that you will be able to afford your loan repayment. There are a couple of different options available from lenders like Driven.
Before you decide to take out a retail merchant advance or a term loan to help grow your company, be sure that you understand the terms and conditions. Remember that you will repay these loans according to those terms, and failing to do so can hurt your business. Finally, make sure that you borrow from a reputable source with solid reviews from other business owners.
If you have bad credit, traditional business loans may seem out of reach. However, there are many alternative lenders out there willing to overlook your credit and base your loan terms on the overall revenue your business generates. Thanks to lenders like these, anyone’s business can succeed.
Advice and research for Canadian small businesses from our expert team