What Are the Best Business Loans If You Have Bad Credit?

Obtaining financing is often a struggle for entrepreneurs with bad credit. Lenders use credit scores for risk assessment purposes. When an entrepreneur applies for a business loan, the lender will look at his or her credit score. With bad credit, the lender will likely deny the entrepreneur of a loan, believing he or she won’t pay it back.

Not all entrepreneurs have stellar credit, however. Research shows that as many as one in three Americans have bad credit. Even if you fall under this category, there are still loans available that you can use to finance your business; you just need to know where to look.

What Are the Best Business Loans If You Have Bad Credit?

Review Your Credit Profile

Before seeking a business loan, you should assess your credit profile. Keep in mind that most lenders don’t just look at your business’s credit score; they look at your personal credit as well. Therefore, you’ll need to pull your personal credit report from one or more of the three major credit bureaus. This will provide you with more information about what’s dragging your credit score down.

Contact Banks

You can contact banks to inquire about their business loans. Banks have different credit requirements for business loans. Some of them require a credit score of 700 or above, whereas others require a credit score of just 600. If your credit score meets a bank’s threshold, you may be able to acquire a loan from them.

Explore Alternative Lenders

Don’t limit your loan search to banks. Banks have stricter requirements than alternative lenders. Many alternative lenders, in fact, offer loans to entrepreneurs and business owners with bad credit. A hard money loan is a type of collateral-backed loan that’s offered by alternative lenders. If you have assets with which to secure it, you can typically obtain a hard money loan, regardless of your credit score.

Consider Venture Capital

While technically not a loan, you can use venture capital to finance your business if you have bad credit. Venture capital is a financing method that involves selling ownership stake to an investor. If an investor believes your business has the potential to grow and succeed, he or she may offer buy ownership in it. You can sell partial ownership of your business to the investor. Since it’s not a loan, you don’t have to repay the money acquired through venture capital.

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