Credit is one of the most important things to the average person’s financial profile. You’ll find that the better your credit is, the better the terms of almost any deal you can make with people and businesses.
The most widely-used assessment of your credit-worthiness is your FICO score, and there are several ways you can improve it.
Revolving Credit and Installment Credit.
One way involves the securement and maintenance of two types of credit: revolving credit and installment credit.
Revolving credit is simply the credit card variety, while installment credit refers to business loans.
Securing one and paying it off on time represents a huge boost to your credit health – as long as the one you select reports to the credit bureaus.
This is why it’s imperative you only get business loans from reputable sources.
You Can Use Credit Unions and Banks.
As you compare terms from online and offline vendors, be sure to consider local banks and credit unions in your search for a viable installment loan.
Credit unions, in particular, are well-known for their practice of allowing secured loans, with your certificate of deposit or savings account used as the collateral.
For comparison, an unsecured loan is one of the credit card variety, where the interest you pay is the indicator of the “trust” the lending institution has in you based on your past credit-related interactions with merchants and lenders.
Other types of secured loans for which you may be eligible, if you don’t specifically want a business loan at the moment, are mortgage and auto loans.
Usually, people who are in the market for a business loan, but lack the minimum credit score to obtain a viable one, will go after a government mortgage loan because of the lower requirements.
Read also: What is a Bad Credit Score and How to Avoid It?
What Kind of Business Loans Can You Get?
There are as many different kinds of business loans as the consumer desires. The market adjusts to meet a need, because this is profitable.
The salient aspect of a business loan is that, as an installment loan, it has paid over a variable period of time with a spate of scheduled payments.
The shorter the loan term, the less interest you pay overall since there’s less risk involved (by the lender’s reckoning). However, you’ll pay more interest monthly (or on whatever payment interval it comes with).
Some of the more popular business loans are offered by lenders such as the Lending Club, which is quite amenable to people with subpar credit histories.
The reason the Lending Club is able to secure business loans for so many people is that it is a sort of clearinghouse. It taps into many loan markets and helps you find the one tailored to your needs. The origination fee is a small percentage of the loan amount.
Other business loan providers are On Deck, Credibility Capital, Currency, Street Shares and Kabbage, just to name a handful. They’re all reputable, and report any installment loans that you secure to all three major credit reporting agencies, so that your credit history can positively reflect the loan.
Just keep in mind that for some lending institutions, there are certain business metrics that go into whether or not your application will be successful. These include how much revenue your business has, the loan amount (of course), and other factors.
How to Find Business Loans When You Have Bad Credit
When applying for a loan, the lenders will ask for the first thing that is the credit score. The lenders will definitely not be impressed by a low credit score.
There are just a few things indicated by a low credit score. Mismanagement of the money may be one of the reasons. Secondly, you may have gone through some hard times. Thus, this tends to be a risk element for the lender, and he becomes alarmed as he can see this as a sign that you will default on the loan.
So, where to find business loans with bad credit?
Loans independent of credit score
The operating history and strength of your business will play a vital role in getting a loan instead of looking at your credit score. The customer has to relate the terms of the agreement, plans of payment and interest rates.
However, your business needs to be old than at least one year for obtaining these loans. With the business being less than a year old, even a good credit score may not be sufficient for securing a loan.
If the credit score is above 600.
With a credit score above at least 600, you can secure a loan from StreetShares. But the business has to be old enough to be eligible for the loan. And the revenue collection must also be about $25000.
The maximum amount that you can lend is $100.000. Interest ranges from 9 to 40 percent.
When you have to apply for a loan, then you should also look for different other loans and compare them to land with the best deal.
With a credit score above 500.
If the credit score is above 500, then BlueVine and OnDeck, both are willing to lend you some amount. The revenue collection must be $100,000.
In case, you pay back all the loan amount within the allotted time, then the lender will report this positively to the credit bureaus, thus helping you to improve your credit score.
If there are any unpaid invoices and credit score is at least 530, then BlueVine may be a good option.
When the credit score is below 500.
Now, if your credit score is falling even below 500, then you have to search for a lender who will not take your credit score into account.
For this purpose, you can also look to go for a credit builder loan. Fundbox and Kabbage are probably good options to go for in this regard because they do not have any minimum credit score requirement.
The businesses that need funding of up to $100,000 can look over Kabbage and Fundbox. Fundbox doesn’t even have a minimum revenue requirement. However, to get a line of credit from Kabbage, you will need to have a revenue of $50,000. What’s more, the business needs to be more than a year old.
Loan applications to the banks get rejected quite often owing to a bad credit score. So, depending on the credit score, the above-mentioned lending options can be tried.
About The Author
This article was written by Jennifer Carson, a professional freelance writer who currently works at GlobexOutreach.