If your credit is less than perfect, it can really weigh you down when it comes to your financial lifestyle. If you are looking at starting a new business, you're going to need a substantial amount of funds to be able to keep your business running and keep the lights turned on. If you've been turned down for a business loan by a finance company or a local lending institution, there may be some other alternatives when you speak with a new lender. Here are some other ways that your business plan may seem more appealing to a lender.
Combine Existing Debt With A New Loan
If your credit score is low due to having a large debt-to-income ratio, this could really be holding you back from getting approval. When you apply for a business loan, ask about possibly combining your existing debt into a new loan plan. This is one way that you can get the money you need and get your business off to a fresh start.
Ask your lender about a personal loan for business. Oftentimes the credit criteria and underwriting requirements for a personal loan is more lenient than with a traditional business loan. Keep in mind that it may be a short-term loan with a higher interest rate. The benefit is that you can keep your payment affordable and pay off your debt quickly while you are building your business. Once it's paid off, your credit score should be higher and you are likely more eligible for a long-term business loan.
Offer Good Collateral
If your credit score is a little shaky, you can improve your chances of loan approval if you have good collateral to present to the lender. Credit scores under 600 are considered poor, so if you have something of value to write into the loan, you can improve your chances of getting approved. Examples may include the following:
- Equity rich home or property
- Vehicles that are paid off and have a high resale value
- Stocks, bonds and gold bars
- Construction equipment and machinery
If you have valuable assets and collateral, and the bank offers you money, a lien may be placed on each piece of property to protect the interest of the bank loan.
Share Your Business Plan
If you've had a successful business operation in the past, it's important to share this with the lender. Incorporate previous stats and financial records as well as what you predict for your future business earnings. This gives your lender a clearer picture as to what exactly you need the money for. In some cases, underwriting will look past your low credit score, if they can see how successful your business could become.
Talk With Your Existing Lender
If you've gone to a larger bank or lender and were turned down because of bad credit, try talking with the lender that you currently bank with. Even if it's just a credit card or checking account, sometimes a strong business relationship comes from being a customer for many years. They will take into consideration your past payment records in regards to accounts that you have with their bank. Sometimes they can offer excellent rates and loan options, even if your credit is slightly blemished.
If you're experiencing credit and FICO score issues, be prepared to offer more to the table, so you're more appealing to the lender. This may increase your chances of getting loan approval to finance your business.