Can Your Small Business Dreams Die with Bad Credit?

For many that dream of opening up their own small businesses or keeping those already open afloat - one major hurdle stands in their way – bad credit.

Should you find yourself in that situation, remember that there are solutions out there in order to better enhance your chances of getting the small business loan you need to get things off the ground or keep the business alive.

Most importantly, do your homework and don’t think that because your credit record is shaky you will automatically get turned down for the finances you require. The thing to remember is that just because one institution may say no, another one could very easily turn around and say yes.

In the event you find yourself in this position, keep several items in mind:

• Banks and/or the Small Business Administration (SBA) will seek some means of collateral with a loan application. Should you present credit score be less than 650, there is a very good likelihood you will not be able to get a bank loan even with collateral;
• You need to know and understand the importance of your FICO score. For those not aware, this number is an assessment that provides lenders with an idea of one’s creditworthiness, meaning whether or not you will likely pay back the loan. Among the things that go into a FICO score are if you paid back prior loans, the amount of outstanding debt you are presently facing, and if you have been good at paying off your loans in the allotted time.
• Merchant cash advances are an option when dealing with bad credit. In these instances, the lenders signs off on loaning money to the small business owner in return for future estimated income earned via credit card sales. The merchant cash advance will be repaid along the lines of a percentage of the business the small business owner actually does;
• A co-signer is another option. With a co-signer that has a good credit record, you stand a better chance of getting the loan, plus you will be dealing with smaller interest rates. Remember, however, the co-signer will be on the hook should you default on the loan, so do not put a family member or friend in such a position unless you are sure you can make the needed payments;
• Collateral loans are an option, but they also can be very risky. With this form of loan, your residence, car or other assets will be put up as collateral in return for the loan. Remember that failing to make the necessary payments can lead to you losing your home, car or other possessions.
• Investors are also something to be taken under consideration. If you find a person or persons willing to invest in your small business in return for part ownership of the company, you can more quickly reach your goals. Once that occurs, you then have the option of reacquiring that portion of the company.

As you can see, there are a variety of options when dealing with bad credit and the need for money for your small business.

Be sure to look around for different options, do your research, and then settle only for a loan that you know you can meet its requirements.