Microloan, a Bad Credit Business Loan Alternative?
Just because you have bad credit, doesn’t deny you access from getting a loan. A microloan is your best bet, according to this article from HispanicBusiness:
It’s true that it’s easier to get a bank loan to buy a franchise than it is to start your own business, but that doesn’t mean it’s easy — especially if you have less-than-perfect credit. But for potential franchisees who been turned down by traditional banks, a microloan could be the answer.
Microloans are designed for borrowers who would be otherwise “unbankable,” with more flexible terms and eligibility requirements than either a conventional bank loan or a 7[a] loan backed by a Small Business Administration [SBA] guaranty. The only catch is that microlenders charge above-market interest rates, typically between 8% and 16%, to compensate for the additional risk involved.
Microloan programs focus on clients that have already been denied by a bank. In our case, it’s someone seeking a loan of $50,000 or less [other SBA-backed microloan programs lend amounts up to $35,000]. Typically, a good candidate has some technical experience or expertise in the business they want to start, but they’ve never owned or run a business before. Usually they have what I’d call an average credit score — in the mid 500s or 600s — but not a high credit score.
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