If you’ve been thinking about starting a business and are ready to set your plans in motion, you’ll very soon realize that starting a business can be costly. Most new start-ups will need some sort of loan to get their business off the ground, but what do you do if your credit isn’t exactly stellar?
If you are going to get a business start-up loan with bad credit, you should know that it’s probably not as hard as you think. It’s also important to know that you aren’t alone. Many small businesses need a financial boost to get themselves going, and many small business owners have bad credit. That’s why there are bad credit small business loans. If you are going to apply for a bad credit start-up loan, there are some things you should know.
What constitutes a “start-up”
Your business is typically considered a start-up if it is less than 2 years old. This is important to know when applying for a small business start-up loan, as you may not qualify if your business is more established than that, but also because many business owners don’t realize that they can actually qualify as a start-up if they are up to 2 years old!
Not all lenders offer bad credit loans
Because they are a higher risk, not all lenders offer bad credit loans. Those that do will mitigate that risk by levying higher interest rates than would apply to a loan that wasn’t considered as high risk. In addition, there may be additional fees charged for bad credit loans. Not all lenders will charge the same fees and/or interest rates. For this reason, it’s best to do a little comparison shopping. Doing your homework can help you to save some money, both on upfront costs and in the long run.
You can boost your chances of getting approved
When it comes to getting any kind of loan with bad credit, there are things you can do to boost your chances of getting approved. One such strategy is to secure the loan by putting up collateral against it. This will tell the lender that you, too, have something invested in the loan and it reduces their risk. The types of collateral that a lender will require will vary, but in virtually all cases the more collateral you can put up, the better.
It’s also a good idea to try to improve your credit score as much as possible. Although it may not have much bearing on the loans you are trying to secure today, the more you can improve your credit now, the better your financial situation will be should you need to apply for a loan in the future.
Don’t miss your payments
It probably goes without saying, but if you have secured a bad credit start up loan for your business, it’s imperative that you make your payments on time. Doing so will help you boost your credit score and it will be a show of good faith for the lender should you need another loan from them in the future.