Business Loans for Bad Credit
Raising money to start a business can involve many challenges. Fortunately, Business Loans for Bad Credit do exist. Many private lenders are waiting in the wings to locate a prospective business situation to invest their money – in hopes of a decent return on their investment.
When seeking Business Loans for Bad Credit, lenders will more than likely view your personal credit if you don’t have any business credit established yet. Your personal credit score in this situation will determine the basis for your loan. This is why it’s wise to clear-up as many negative items in your credit report as possible before you decide to pursue business loans for bad credit.
If you’ve established good history with a banking institution over the years, this should be one of the first sources you should check with. While there is no guarantee that you will get all the money you need, chances are that they may be willing to loan you some amount of funds if you’ve had a positive banking relationship with them. And if they can’t, for any reason, they may be able to refer you to other possible lending sources.
However, when the banks turn you down or let you down all together, then private lenders are a possible alternative for you. This typically consists of individuals or small groups of investors looking for great opportunities to invest their money. You can oftentimes find private lenders by asking any & everyone you can if they know someone who might be interested in investing in a business venture.
You may also be able to run a cheap ad in the financial section of your local newspaper or online. Also you can type in the search terms like: business loans for bad credit, bad credit business loans, small business loans, etc. into your favorite search engine and explore your options.
When approaching private lenders with your business proposition, make sure that you are professional, organized and have your business plan down pat. No one wants to invest in someone that is unorganized. Ask yourself this question “Would I be willing to invest in me?” Be totally honest with yourself. If the answer is NO then you must go back to the drawing board to perfect your business image and presentation until you can undoubtedly say YES! without hesitation.
Business Loans for Bad Credit Criteria
Repayment Ability – Lenders need to feel that you will be able to pay back the money they lend you. You can demonstrate this by showing any positive cashflow patterns in your business — as well as any collateral that you may have to back the loan. If you can’t demonstrate any of this, then you’d better have a Fantabulous Business Plan!!!
Business Plan – When seeking startup business money, investors need to clearly understand your business potential. Your business plan should be a well mapped-out blueprint of your business. You should also be able to give lenders a good overall mental picture of your business within a few sentences or less. If you can’t provide a “short description” of your business in a way that people can understand, then you need to go back to the drawing board. Think about it… Would you want to invest your money into someone’s business if they couldn’t even give you a good grasp of what it is without rambling on… and on… and on…?
Target Market – Lenders will definitely want to know who your ‘target market’ is. Meaning: Exactly what type of person would need a product/service like yours? How much competition are you up against? What is your USP (Unique Selling Proposition) i.e. how will you present yourself differently in order to outshine your competition? How will you reach/connect with your target market? These are some key questions that you must be able to answer to increase your chances of securing Business Loans for Bad Credit.
Profit Potential – Investors are always thinking ROI (Return On investment). They want to know how much money they stand to make from the money they invest in your business. You business proposition must radiate *$!Profit Potential!$* If you can show potential investors how they can get a good ROI (Return On Investment) – then they will be more motivated to supply you with the financial backing you need.
Character – Investors are not only looking at your business; they are also looking at the person behind your business –> YOU. Make sure that you project a strong air of professionalism when approaching investors. Be organized, well-groomed, and most of all know how to express yourself clearly. Prior to meeting with potential investors, it is good to practice answering, out loud, any questions you think will arise in an interview with a potential investor. If you can’t answer them in practice, chances are you’ll be lost for words when the time actually comes. Remember: “You never get a second chance to make a first impression.”
Your Financial Contribution – How much of your own money are you willing to invest in your business? If you are not willing to invest any of your own money in to your business, then why should you expect others to? Lenders must see that you have enough belief in your business pursuit that you are willing to put some of your Own Money on the line. If they don’t see this, then you might not see their money either. Although you may be able to land Business Loans for Bad Credit without investing any money of your own, doing so could definitely increase your chances of attracting others to invest in you.
How long in Business – When seeking a loan for an existing business, lenders will definitely want to know how long you’ve been in business. Depending on this history, it can greatly influence the amount lenders are willing to invest in your business. If you’re just starting your business, then you will want to at least show your experience and background in your chosen business field. Any degrees, special training, rewards, extensive research or other could help you exemplify history in your field – especially if you’re just starting out.
Risk Level – Every business investment comes along with risks. Nothing is guaranteed. However, if the risk level of your business is too high, you might find it harder to secure business loans for bad credit. The benefits of your business should definitely outweigh the risk (or at least appear to). You need to be able to paint the most rosy picture of your business as possible – while still remaining realistic – if you want to capture the interest of potential investors.
Credit – Some lenders will be concerned about your credit rating, and some won’t. It is best to secure business loans based on your business credit rather than your personal credit. If you haven’t established any business credit yet – then everything will be based on your personal credit, which may not be powerful enough to get you what you want – especially if you have bad credit.
However, it would be advantageous of you to get a copy of your personal credit report to resolve/remove as many negative items as possible prior to approaching lenders about Business Loans for Bad Credit.