If you want to get a business loan from a bank, you would usually need to prove that you have a high credit score. However, if your credit score is low, but you still want financial help, you can still achieve your dreams by using creative methods or by looking at alternate channels to get some.
Evaluate your financial needs
Before approaching a bank for some business loans, you would need to evaluate your financial needs. Most often, small business owners are denied a loan based on their low credit score. So, make sure you genuinely are in need of financing and that you doing not actually have the money to support your ambitions. Also, when you consult with a person giving out the loan, make sure you ask them whether or not your financial situation merits a loan.
Make Sure You Borrow an Amount You Can Repay
You may be able to qualify for one of the many small business administration (7a) loans, if you stand to prove that your financial needs are less than $35,000. The small business administration loan programs are guaranteed by the government, so that even those with a low credit score can benefit from them. The loan program offers a list of lenders, who give loans even to those that do not have a good credit score, so that you can apply directly through one of them. Before applying for this loan, you should consider going to one of the small business administration (7a) loan offices in order to present your situation, such that even if you have the worst credit, you would still stand to get a business loan.
Make sure you offer either your property, equipment or any other entrepreneurial assets as collateral in order to get a loan. Find out whether the lender can reduce their risks when you offer them collateral such that even if you are unable to repay, they can sell your assets and get the money. In such cases, they will be more ready to offer you a loan. If not, then ask your friends and family whether they can help you to repay the money on your behalf.
Get a Peer to Peer Loan
If you cannot get a business loan just because you have a low credit score, you can go in for peer to peer loans. It is an online platform, wherein you can directly borrow some money from an individual in place of borrowing from an institution. Since it is a streamlined process, it is growing in popularity and is a win-win situation for both the lender as well as for the borrower. You can simply post your needs and requirements on the peer to peer platform on the internet and why you want the amount and you will get a reply from variegated lenders, who would review your post first. When you select one of the lenders, they will check your credit score and offer you a loan. Even if your credit scores matter, the peer to peer lenders will only be empathetic enough to understand your situation and offer you a loan.
Apply To a Credit Union
Even though credit unions are similar to banks in the way they function and the geographical area in which they are located are also in the vicinity of each other, they are not the same as each other. The members of the credit unions enjoy the benefits in the form of better customer service and lower fees. They are mostly not for profit organizations that you can call upon in case a bank denies you a business loan. Contact your local credit union to see whether or not you are eligible for a personal loan. This way, you will also know, if you can benefit from their low interest rates.
Consider a Loan from Family Members or Relatives
If an online peer to peer lender will not give you a loan, consider approaching a family member or a relative. However, you would need to treat your family members as seriously as you would a bank or any other lender and make sure you repay them in full after borrowing some money from them. In order to avoid any complications in the future, make sure you enter into a written agreement with them by including your repayment terms, any collateral you would be offering them and the like. You can even get sample promissory notes from the internet that you can use in your written agreement. You must properly secure a loan in order to take advantage of a reduction in the mortgage interest rates, in case you are buying a home. Make sure you use an online service in order to secure your loan. The main idea is that, at the end of the day, everyone in your family should benefit from the loan you have taken. Taking a loan from your family should however be a second last resort to taking a business loan from a lender. You do not want to see a relationship go sour over arguments about some misunderstanding over money or a bad debt. So, make sure you repay the money in full to your family member or relative.
Research a Business Cash Advance
A business cash advance is one of the best forms of business loansyou can get. This is the best financing option, in case your needs do not go beyond a few thousand dollars and your need is based primarily on cash flow troubles. However, if you can prove that your business has earned you at least $2,500 or more every month and that you have been in business for at least a year, and then you can easily avail a business cash advance of up to $10,000. If you decide to go in for this financing option, you would however need to have done your homework on the terms and conditions and the interest rates offered by the business cash advance agencies carefully. You can do this by comparing the features of the different business cash advance agencies in your locality.