Every year, many people decide to start their own business and one of the ways in which they get the funding is through taking out a business loan. While those with decent credit won’t generally have a problem getting a loan as long as their business plan is good, those with damaged credit may find it far more difficult.
Having a bad credit score and history always impacts on your ability to get any type of credit, and this includes business loans. As someone with bad credit, you represent more of a risk to the lender, which means that your ability to get financing from them will be reduced.
What are the chances of getting a loan with bad credit?
If you have a low credit score but you need to take out a business loan, you will really have to do your research to find a lender that may be able to help. It is not impossible to get a business loan if you have bad credit but it is definitely more difficult. In addition, you will find that even if you are able to get a loan the interest rate you will be charged is far higher than the rate that would be offered to those with good credit. Again, this is because you represent more of a risk to the lender.
Business experts on msnbc news have spoken in the past about the impact of your credit score when it comes to getting finance such as a small business loan. This is why it is best to check your credit score before you even make an application for finance.
One thing you should bear in mind is that the more loans you apply for and are rejected for in a short period of time, the more of a negative impact this will have on your credit score. You therefore need to avoid the temptation to make random applications to a variety of lenders without checking on the likelihood of approval. Some lenders will actually stipulate what your credit score need to be in order to be eligible, so you will know right away whether you are likely to be accepted based on your own credit score.
You may have to focus your search on lenders that deal with sub-prime business loans. These are loans that are granted to those with damaged credit and the rate of interest charged is much higher than average. However, it may be your only option if your credit is really damaged. Having said that, you need to ensure that the lender you go through is reputable and accredited, otherwise you could end up going through a company that is unregulated. Check reviews about the lender and make sure that they are industry regulated before you even consider applying. You also need to compare the cost of the borrowing from one lender to another, as the rate of interest along with the amount that you can borrow will vary.
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