With over 250,000 new small businesses opening in the U.S. in 2019, it’s safe to say that we are experiencing a shift in commerce that is focused on independent contractors. Many workers are choosing to break away from global corporations and striking out on their own. Exhausted and disheartened by working to the bone to make other people’s dreams come true and bank accounts grow, entrepreneurs are creating a renaissance in the world of commerce.
So, what do you do if you have a million-dollar idea, but don’t have the funds to get your company off the ground? For most small business owners, the first step is to apply for a loan. However, what if you have bad credit? Is it possible to get a business loan so that you can launch your startup if your credit is less than perfect? There are some alternatives and loans for bad credit available for those that dare to dream. Let’s look at the steps towards getting a business loan when you have poor credit.
Review Your Credit Score
If you want to apply for a business loan but have been operating for less than one year, your application will be based on your personal credit score. If you have been open for over a year, a combination of your business and personal credit scores will be evaluated. Before you talk to a lender, it’s crucial to review your current scores. Not all credit scores are accurate as they sit on the books. Get a full credit report, and go through each item to review the validity of each claim. Any bogus listings should be immediately corrected or removed.
Do Your Research
Not all loans are created equal. It’s important to do your research before committing to any type of loan. Be wary of those that promise guaranteed approval for everyone. These types of lenders are often fraudulent and carry heavy penalties. Start with traditional lenders and move on to private firms if you fail to qualify for a bank loan.
Create a Business Plan
Few lenders will take your request seriously if it isn’t presented in a professional manner. Before you visit any lending firm, it’s crucial to prepare a solid business plan and have a presentation ready for your meeting. Lenders will want to know that you have a solid plan in motion and what your projections are for the future.
Put Up Collateral
For anyone that has poor credit, it can be easier to get a secured loan than a traditional loan. A secured loan requires you to put up collateral against what you are borrowing. You can put forward the title to your vehicle, the equity on your home, or even an investment portfolio.
Get A Cosigner
Lending companies are most concerned with their ability to collect on their loan. If your credit history reflects a past of unpaid debts, it may be harder for you to secure a loan without more to back you up. If you can get a cosigner you may have a better chance. A cosigner is a second party with good credit that will hold responsibility for the repayment of your loan if it is not honored.
Starting a business takes dedication, hard work, and the willingness to take risks. If you have struggled financially in the past, resulting in a low credit score, don’t give up on your dreams of opening your own company. Follow these tips to help you get a business loan when you have poor credit and work towards a bright future as a successful entrepreneur.