There are still lenders who are willing to take a chance on business owners with bad credit. The same is true for startup companies that have no credit history as of yet.
Business owners with negative personal credit are confronted with restrictions in securing a commercial business loan. The welcome news is it is not totally impossible to obtain business loans even if you are affected by bad credit. You cannot expect commercial banks to approve a loan for people with credit ratings below 640. However, there may be away out for you given this predicament.
Obtaining Bad Credit Commercial Loans
Your first move is to separate the personal from the business credit. It is essential to get this done or else you will find it very hard to get any funding assistance for your enterprise. Even the equipment leasing firms, small-town lenders and specialty lenders scrutinize both personal and business credit ratings. The credit score for business is almost like the personal grade. The only difference is that it is not associated with your Social Security number. This can get your venture the funding that it requires.
The way to build your business credit ranking is to get a tax identification number together with a legal business name. You become eligible for small credit lines that are awarded to sellers and suppliers. These can be utilized as positive credit history for bigger commercial loans. It is essential to establish a favorable business credit history with business credit bureaus. These are Dun & Bradstreet, Equifax and Experian.
Credit Reports and Collaterals
Once you have been cited for bad credit, try to determine the position of lenders regarding bad credit. Obtain a copy of your credit report and check for accuracy. If there are flaws in your report, make sure that these are resolved immediately. It will be easier to solve this issue if you have not been given an R9 rating which means bad debt that was never settled, always paid late or included for bankruptcy. Possession of this R9 category requires you to explain to the lending firm or it may not be possible to obtain a commercial business loan.
In the same manner, if you desire to acquire a business loan despite the negative credit ranking, it will help to present collateral which may consist of assets such as money in the bank, real property, automobile and equipment. This will serve as guarantee that in case of a default, the lender can get something that has value in return. This falls under the category of secured business loan.
Another thing that can help you is the complete business plan. You have to prepare one which the commercial loan lenders can consider. This plan must contain your qualifications in this particular industry, competitive advantage, expertise, competitors in the trade, and recommended strategies to get a substantial share of the market. It has to be detailed and contain data along with figures to support your claims. You can also try the micro-lending facilities, cash advances, peer-to-peer loan, or business line of credit to take the place of conventional commercial or SBA loans. Do not get frustrated if you are rejected for a loan since this is normal. Keep on trying until you are able to get an approval for a commercial loan.