The impact of credit history at the time of applying for a loan is a well-known fact. Poor scores can take away an opportunity to borrow money and solve the financial problems of a business. If the scores are not perfect, you must have been turned down by any lenders already.
As bad credit is associated with risk, loan providers usually stay away from lending money to a business with poor credit tags. In the case of an emergency, getting immediate access to funds can help the venture survive. When this does not happen, the problem intensifies, and debt keeps piling up.
A negative response is a common thing from traditional lenders who have fixed criteria. However, they do not exist alone in the lending market, as there are direct lenders too. They approach this issue of bad credit flexibly.
Because of this flexibility, it might be possible for you to get bad credit business loans on guaranteed approval as well. However, it does not mean that you will get straightforward approval once submitting the loan request. Some steps and checks should be completed for smooth decision-making.
Keep exploring this blog to understand the avenues you can use to strengthen your chances of loan approval for your business.
Get access to funds for business despite credit score issues
Bad credit is a genuine reason behind facing rejection from loan providers. The instances that have led to such a situation hardly matter, but the outcome can be terrifying. No need to feel disheartened if your business needs an immediate dose of cash to survive.
Despite poor credit history, you can make it through loan approval. Some tips and tricks are shared here.
· Try to clear up pending payments
Maybe you have to pay money for raw materials, but you have not received payments from your clients. Now, here, your inability to pay is not your mistake directly. Moreover, you can do the needful to get your receivables on time.
Offer special discounts and exciting bonuses to encourage clients to pay early. Besides, tell them about the freebies they can enjoy by paying some portion in advance. The faster you get paid by them, the easier it will be for you to clear up debts.
This will help improve your credit score status. The lender will be delighted to see the efforts you have put in. This can work in favour of you getting loan approval for your business despite poor credit.
· Search for genuine direct lenders
Now, for someone like you who is so occupied with the business, exploring the lending market would be difficult. Besides, you do not have the knowledge to filter different types of loan offers. Your dilemma is real, and you can get over it with the help of a business loan broker.
They can act as the bridge you need to find the right direct lender. They should display flexible lending conditions and might get ready to offer help by emphasising the positive points of your business. Finding some lenders like these becomes easy when you have intermediaries to help you out.
Understand the terms and conditions following the rate they have offered. Check if the financial condition of your business is suitable enough to manage loan payments.
· Find a guarantor or arrange collateral
Since bad credit appears like a warning signal to the lender, they might need something as assurance for loan payments. It would be convenient if you could find a guarantor to support loan payments on behalf of your business. According to the lender, that person should have favourable credit scores since your business lacks this factor.
Besides, the guarantor should have a steady source of income, or else repaying will be a long cry. This surety can help you convince the lender. If such an opportunity is not accessible to you, this does not mean you should give up.
You can use the business assets like equipment or invoices to make it through getting funding. Suppose you have bought a tool for your business; you can utilise this to arrange funding. This will act as an asset that the lender will own till you make payments.
Despite the fact that the loan provider will remain the owner till the term of repayment, you will have permission to use it during this span.
· Choose a suitable and small amount
Direct lenders will make a suitable range of loans available for you. They let you pick any amount accordingly, and this opportunity gets misused often. Thus, you need to be careful while selecting the loan amount.
You should not forget that your business should be generating revenue to support the loan payments. The problem with a big amount of loan is that you will have to repay a bigger amount in that case. This is because the loan amount will add interest rates, and the repayment amount will elevate.
Moreover, the lender will take note of the financial situation of the business. If they realise that as a business owner, you have opted for an incorrect amount, they will disapprove your request. On the other hand, if they come to know that you have applied for a feasible amount that you can repay easily, approval will be easy for you.
· Craft the business plan carefully
You might have started the business with no intention to work on creating a business plan. However, during this situation, when you have bad credit and urgent money is required, you might need this document. As it will hold all of your financial projections, this can help the lender understand the financial roadmap you want to follow.
Thus, you must keep this document handy while applying for loans. This can change the game for you. As a newbie entrepreneur, you must realise its significance.
The bottom line
Provide correct details in the application form so that the lender does not face any difficulty in processing your application. You must also review your credit report from time to time. This will help you to spot and rectify the errors if such things exist in your records.
Harry Kane is a financial writer and author who has covered wide topics related to business loans and finance for the last decade. He has been working as the Chief Contributor in finding out deals on various business finance products covered by Thebusinessfunds, a reputed business loan broker firm in the UK. The primary work of Harry is to analyse the loan requirements of various businesses according to their circumstances and affordability. He directly communicates with the loan aspirants and guides them to get the right loan matching their needs. He has a vast experience in finance writing, working with many major business firms in the UK. At Thebusinessfunds, Harry also used to write well-researched blogs covering the financial problems of business loan aspirants and providing relevant solutions. He is a postgraduate with MSc. in Banking and Finance.
