Small businesses need to prove their ability to repay loans if they’re ever going to secure funding from one of today’s top lenders. Typically, small business owners need to provide a business plan, their credit history, equity investments, and collateral to prove their worth. When everything is supplied and acceptable, small businesses usually qualify for a low interest rate loan with favorable terms.
If a business owner with bad credit is looking to get a loan, you’ll have to get much more creative to increase your chances of borrowing money from the establishment. But rest assured, it is possible to get a loan when you have bad credit and no collateral. We’ll tell you how with our tips below.
Take Steps to Increase Your Chances of Getting a Loan
First, to qualify for a small business loan with no collateral and bad credit, you need to put together a rock-solid business plan. This business plan needs to show potential lenders that your company has positive cash flow and is experiencing great success.
By proving that you are worthy of credit, it will show potential lenders you’re a good investment because you’re working hard to grow your business to take it to another level. It will make your chances of getting a loan that much better.
Next, relying on a well thought out business plan is only part of the process. You also have to begin taking steps to boost your credit worthiness. By doing so, you’ll have a better chance at getting a loan. So take a look at your credit report on all three credit bureaus, make sure it’s accurate, and file disputes if you find any mistakes.
Last but not least, if you’re doing things to drive your credit score lower, you have to stop immediately. If you regularly make late payments, end this practice right away. If you already use too much credit, start paying down your loans and credit cards. And stop the hard inquiries because they too are lowering your credit score.
Consider Peer-To-Peer Lending
If all traditional methods of getting financing fail, peer-to-peer lending is an excellent option. Peer-to-peer investors love taking chances on companies by providing unsecured business loans.
Multiple peers will lend small amounts of money. If enough people believe in your business, you’ll raise the capital you need in $50 and $100 increments from dozens of investors willing to take a chance on you and your business.
So create a compelling story and share it on P2P websites. You’ll have a much better chance of getting financing from your peers if your story is convincing, heartwarming, entertaining, and ultimately worthy of their investment.
According to Small Business Loans Simplified, a website sharing information about small business loans for those with bad credit, “Small business owners can expect to go through periods of time where the cash flow account is low. Having a plan to deal with these inevitable downturns is critical for any long-term planning.” Peer-to-peer lending is an excellent safety net.
Please use these tips to secure a small business loan with bad credit and no collateral.