If you want to secure small business loans, lenders will generally have you prove that you are actually able to repay those funds. For this, they will take a look at your credit history, your collateral, your equity investment and your business management experience. If you are the “proud” owner of a bad credit score, but still need some assistance in establishing your business, this can be achieved by simply being creative. There are several lenders out there that may help you out even if you have no collateral and a bad credit history.
- Increase Your Chances
You will need to devise a comprehensive business plan that suggests positive cash flow if you want to land your hands on those business loans. If the idea looks promising and viable, many lenders will be definitely willing to give you the cash that you need. Also, make sure that you take all the steps needed in order to build up your credit history. Evaluate your credit report and see what factors are driving you down the most – and figure out ways to fix your credit rating.
- Form a Partnership
If you already have a good business plan with high growth potential, you may be able to partner up with someone who has a good credit score and is eligible for business loans. That partner can co-sign for you, and you can both be responsible for the payments – if that’s what you agree on. You may also want to discuss the way in which you two will run the business; whether they want to be fully involved or if they trust you enough to operate it alone.
- Peer to Peer Financing
A peer-to-peer financing will involve individuals rather than a financial institution. They provide unsecured business loans to the borrowers (their peers). In order to apply for such business loans, you may access the website of a lending company which will pair you with a potential lender. The transactions will take place online once the lending company has authenticated both individuals. The interest rates will be set either by the enterprise or the lenders themselves, depending on your credit standing.
- Friends and Family
If you are truly desperate, you may want to approach your friends and relatives to help you with some funding for your business. Explain to them that your credit is not good enough to impress the lenders and that your collateral isn’t helping either. They may lend you the money you need to start your business, or they may take the loan out for you – provided they have good credit history. Make sure, however, that your company will generate a good cash flow in order to avoid any future tensions in your relationship.
Once you put your mind to it, there are many ways for you to get a loan even if you have a bad credit history and no collateral. Regardless if you go for partners, peers, friends or you simply try to improve your credit, remember this: perseverance is key when it comes to business loans.