How to find business financing even if you have bad credit
For many business owners the biggest obstacle for getting business financing is a bad credit score. The reality is that especially in today's tighter lending market few lenders (if any) will be willing to take a chance on you with a poor credit score. This is true even if you have a business that is up and running and making a profit. The lender will use your credit score to view you as a high risk to default on your loan. However, there are some things that can do that will put you and your business in a better position to obtain business financing even if your credit score is less then stellar. Here is what you need to know about how to find business financing even if you have bad credit-
- Separate your business and personal credit-The first step is to separate your business and your personal credit. If you have been using personal credit cards to fund your business then you need to stop that right away. If your personal credit score has affected your business credit in any way this will also be an obstacle to getting credit. You should make sure that your business is established for its own credit. This includes getting a Tax ID number to start building up a business credit history. Keep in mind that this is a time consuming process that will go slowly but if you work at it you can build up your business credit and begin to obtain the financing that you need for your business. Finally, do not overlook going over all of the information on your personal and business credit reports in order to correct any mistakes or inaccurate information.
- Be willing to offer up collateral-There is no getting around the fact that the lender will want you to assume some of the risk. This means that you should be prepared to offer collateral. Keep in mind that the more collateral you are able to offer the bigger the line of credit or loan you will be able to get. However, you should never risk anything that you can't afford to lose. Far to often business owners have found themselves devastated when they pledge their home or other valuable asset only to find that they lose it when they default on the loan.
- Think out side of the box-The bottom line is that if you have bad credit you will need to be able to think outside of the box in terms of how you will get business financing. You will need to be willing to consider non-traditional means of funding your business. You will have far more options to consider if you are willing to do this. The good news is that many non-traditional means of funding your business will offer you more flexibility in terms of payment even if you do pay a higher interest rate. Best of all, these non-traditional means also offer more options to those with a less then stellar credit score.
- Know that you will pay more-There is simply no getting around the fact that you will pay more for business funding if you have a bad credit score. Almost every lender will look at you and your business as a bad risk. Even if you are able to obtain a traditional business loan you should prepared to pay a substantially higher interest rate. In addition, to paying higher interest you will most likely have to put up collateral, as well. However, over time while making prompt payments you can improve your credit score and get yourself and your business back onto better financial standing.