Where to apply for a business loan with bad credit

## Where to Apply for a Business Loan with Bad Credit

**Navigating the Financing Landscape with a Subpar Credit Score**

Securing a business loan with bad credit can be an arduous task, but it’s not an impossible one. Understanding your options and tailoring your approach can significantly increase your chances of success. This comprehensive guide outlines various reputable lenders that cater to borrowers with credit imperfections, along with their eligibility requirements and application processes.

### Understanding Your Credit Situation

**Checking Your Credit Score:**

The first step towards obtaining a business loan with bad credit is to assess your current financial standing. Obtain a copy of your credit report from the three major credit bureaus (Equifax, Experian, and TransUnion). Review the report thoroughly for errors and dispute any inaccuracies.

**Identifying Your Credit Score Tier:**

Credit scores generally fall into five tiers:

– Excellent: 800 – 850
– Good: 740 – 799
– Fair: 670 – 739
– Bad: 580 – 669
– Poor: Below 580

A bad credit score typically falls below 670.

### Types of Lenders for Borrowers with Bad Credit

**Online Lenders:**

Online lenders have become increasingly popular for borrowers with bad credit due to their streamlined application process and quick turnaround times. These lenders often use alternative credit scoring models that consider factors beyond traditional credit scores, such as cash flow and business performance.

**Community Development Financial Institutions (CDFIs):**

CDFIs are mission-driven lenders that focus on providing financial assistance to underserved communities, including businesses with poor credit. They typically offer lower interest rates and more flexible repayment terms than traditional banks.

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**Government-Backed Loans:**

The Small Business Administration (SBA) offers several loan programs that are designed to support small businesses with bad credit, including the 7(a) loan program and the microloan program.

### Top Lenders for Bad Credit Business Loans

**1. Kabbage:**

* **Eligibility:** Minimum credit score of 560, 6 months in business, and $50,000 in annual revenue
* **Loan Amount:** Up to $250,000
* **Interest Rates:** 11% – 48%
* **Repayment Term:** 6 – 24 months

**2. OnDeck:**

* **Eligibility:** Minimum credit score of 600, 9 months in business, and $100,000 in annual revenue
* **Loan Amount:** Up to $500,000
* **Interest Rates:** 9.99% – 39.9%
* **Repayment Term:** 12 – 36 months

**3. Lendio:**

* **Eligibility:** Minimum credit score of 550, 3 months in business, and $50,000 in annual revenue
* **Loan Amount:** Up to $500,000
* **Interest Rates:** Varies by lender
* **Repayment Term:** Varies by lender

**4. Funding Circle:**

* **Eligibility:** Minimum credit score of 600, 2 years in business, and $150,000 in annual revenue
* **Loan Amount:** Up to $500,000
* **Interest Rates:** 8% – 36%
* **Repayment Term:** 6 – 60 months

**5. SBA 7(a) Loan:**

* **Eligibility:** Varies by lender
* **Loan Amount:** Up to $5 million
* **Interest Rates:** 6% – 9%
* **Repayment Term:** Up to 25 years

### Application Process

**1. Gather Required Documents:**

* Business plan
* Financial statements
* Tax returns
* Personal and business credit reports

**2. Research Lenders:**

* Compare the eligibility requirements, loan amounts, interest rates, and repayment terms of different lenders.
* Read reviews from previous borrowers.

**3. Pre-Qualify (Optional):**

* Some lenders offer pre-qualification tools to estimate your eligibility and loan terms without affecting your credit score.

**4. Apply Online or In-Person:**

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* Complete the lender’s application form and submit the required documents.
* Be prepared to provide detailed financial information and explain any credit issues.

**5. Underwriting:**

* The lender will review your application and financial information to assess your risk profile.
* They may request additional documentation or clarifications.

**6. Loan Approval:**

* If your application is approved, the lender will provide a loan offer outlining the loan amount, interest rate, and repayment terms.
* Review the offer carefully and ask any questions you have.

### Tips for Improving Your Chances of Approval

* **Build Business Credit:** Establish a business credit file by opening trade lines with suppliers. Pay invoices on time to build a positive payment history.
* **Get a Co-Signer:** If your credit score is very low, consider getting a co-signer with good credit to strengthen your application.
* **Provide Collateral:** Offering collateral, such as business assets or personal property, can reduce the lender’s risk and improve your chances of approval.
* **Explain Any Credit Issues:** Address any negative items on your credit report in your loan application. Explain the circumstances and any steps you have taken to improve your credit.
* **Meet with a Credit Counselor:** A non-profit credit counseling agency can help you develop a plan to improve your credit score over time.

### Conclusion

Obtaining a business loan with bad credit is a challenge, but it is not insurmountable. By understanding your options, tailoring your approach, and leveraging the resources available to you, you can increase your chances of securing the financing you need to grow your business.

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