The easiest way to get money for the business project is to contact the bank. But bank managers, from their side, will carefully check the credit rating and solvency. If your credit history is bad, then getting a loan would be a problem.
Let’s have a look at the types of business loans and conditions on which the users can get money with a bad credit history.
Conditions for getting a loan
Large banks have equal terms for giving money to their clients. Those who have opened their own business and plan to have some more expenses, such as additional equipment or buying goods to increase sales without raising working capital, mostly go for help to the bank. The financial company makes a strict check up of all the declared information in order to find the best solution for every user.
But the downside of small business loans for bad credit is that the rate, compared to a consumer loan and concessional lending, is often higher. The easiest way for the beginner entrepreneur in order to get money is to get a consumer loan.
Bank managers also evaluate the field of activity of the company or entrepreneur when considering the application. If you want to get guaranteed money in debt, focus the attention of managers on the positive aspects of your company and business profitability.
Main types of available business loans
Business loans are variable and include terms, interest rate, maximum and minimum amount, and other characteristics. Let’s have a look at the most popular variants.
- One-time business loan. The company receives money according to the specified details, and returns the entire amount immediately with interest. Most often, a loan is given for 3-4 months.
- Revolving loan. Serves to replenish working capital to keep the company afloat.
- Overdraft. A company or entrepreneur draws up an overdraft to purchase equipment or goods for sale. The difference from a regular loan is that the entrepreneur pays an overdraft fee of 2-3%. In addition, the bank charges interest for the actual use of this service. For example, if you bought goods for credit money under an overdraft, then you will return them with interest after the sale of products.
- Business credit card. Such a card is issued by entrepreneurs with a predetermined limit. With this banking product, it will be possible to pay with suppliers.
- Credit line. If a business representative has expenses planned, but it is difficult to determine the exact amount, the easiest way is to issue a credit line. A banking product entrepreneur has the right to take money several times, but for an amount that does not exceed the limit. Payment must be made only for the actual use of money. For example, they opened a line with a limit of a certain amount for a year. A month later, they borrowed the amount for three months, they returned the money on time. Interest will be accrued exactly for three months or for the actual use of money. The remaining money can be borrowed during the remaining months.
How can a business get a loan with a bad credit history?
If a loan application is submitted on behalf of a company, then the owner’s credit history plays an important role in the bank’s decision. If it is damaged, it will be difficult to get money in debt. But still there are options that will improve the situation.
For example, a company works closely with another company that has a good credit history. Or the business is owned by several partners at once, so they have common interests. In this case, it is best to apply for a loan with the involvement of a financial guarantor who has a high rating.
Another option for obtaining a loan for a business with a bad credit history is to get money on collateral. For example, give the bank as a guarantee a share in your business, a piece of equipment, land or real estate. But if you don’t meet your financial obligations, you will lose your deposit.
For entrepreneurs with bad credit history, banks also offer so-called express loans. In this case, the solvency of the entrepreneur is not checked.