Many business owners have gone through the arduous process of trying to secure business funding. It can be challenging even when you have excellent personal credit, but even more so when your credit score is low. While time-consuming and challenging, acquiring the business loan you need might be possible. You may just need to follow the steps below.
Step 1: Check Your Credit Score
You can check your credit score using a credit repair business to determine whether you’re in the best possible position to apply for a business loan without making any changes. When you view your credit file, you can see anything that might be contributing to a low score, such as errors and missed payments that you can potentially correct before going through the loan application process.
Step 2: Determine Your Reason for Finance
Before lending institutions approve loans for businesses and individuals, they consider the reasons for the loan and the potential for that loan to impact your earning ability and profitability. As you’re going to be asked these questions, it doesn’t hurt to have a firm understanding of why you’re requesting a loan in the first place.
You might also see the value in questioning whether the funds serve the purpose of increased business efficiency and higher sales and whether there are other financing options worth considering, such as crowdfunding.
Step 3: Find Out If You’re Eligible
Many factors can contribute to your eligibility for a business loan, and it’s crucial to be aware of these before applying for funding. Otherwise, you might be disappointed by the outcome.
Consider your personal credit score, business credit score, and how many years you’ve been in business. Most lenders prefer to lend to companies operating for at least 12 months. Your annual revenue, current debt levels, cash flow, and cost management might also come into play when being considered for a loan.
Step 4: Look At Different Lending Options
There is more than one type of loan provider, and not all will be right for your unique needs. Don’t be afraid to shop around and see what’s available. Typically, the most straightforward business loans come from online lenders, traditional banks, and credit unions. However, if you have poor credit, you might find online providers with less strict criteria than those more conventional options.
Step 5: Write a Business Plan
Lenders want to be sure that you’re in a position to pay back the money they’ve loaned to you. Therefore, they might request a business plan that outlines your operational and financial goals. While time-consuming to write, you can download business plan templates from the internet that provide a foundation for you to work from. You can then include information like product and service descriptions, market analysis, organization and management, and your financials.
Getting a business loan with bad credit is not always easy, but it’s often possible. Try repairing your personal credit, viewing the many different lending options, and ensuring you’re receiving funding for all the right reasons. You might be on your way to a loan approval before you know it.