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How to Get a Business Loan with Bad Credit

By , May 15th, 2017 | No Comments

How to Get a Business Loan with Bad Credit
If you thought that getting a bank loan for your business with little or no credit history was tough, then it’s a proverbial walk in the park if you have bad credit. And these days, “bad credit” doesn’t mean that a credit history that is full of unpaid debts and bankruptcies. As far as banks are concerned, anything less than flawless goes straight into the bad risk bucket.

What’s the story here and has it always been this way? No. “Once upon a time” banks were (more or less) reasonable when it came to providing business loans for borrowers with bad credit. That’s not to say that they raced to open the vault. But they understood that a bad credit score is about the past – not necessarily about the future. And if this sounds like an ethical or moral view, let’s remember that we’re talking about banks here! The perspective was pragmatic, self-interested and motivated by profit.

Of course, this was perfectly fine for borrowers with bad credit, since they received a much-needed bank loan to sustain and expand their operations. Everyone won — including banks.

And then the Great Recession arrived, and the very same banks that engineered this financial catastrophe in the first place decided that it was in their best interest to put a vice grip on their business loan application requirements, and start tightening…and tightening…and tightening.  

However, in their frenetic race to protect themselves against all risk – and basically violate their longstanding promise to “support small businesses in the community” – banks did what banks always do: they went too far! That is, they clamped down so hard and thoroughly on bad credit business loans, that they ironically laid the groundwork for what has now become the multi-billion dollar alternative lending marketplace.

Essentially, the alternative lending marketplace is populated by lending firms that are filling the enormous gap that banks created when they fled the impaired credit segment in the aftermath of the Great Recession. While there are different kinds of lending firms in terms of size, sector, specialization and so on, they typically offer business (and sometimes personal) loan products that are easier to get for borrowers who have no, little or bad credit.

Naturally, the interest rate is higher than banks – but it’s not as costly as some people believe, and it’s certainly cheaper than taking out a cash advance on a credit card; provided that this is even an option. What’s more, repayment terms are almost always more flexible vs. bank loans, approvals take days rather than months, and the application is a few pages instead of dozens.

The bottom line? If your credit is less-than-flawless, but your business is on-track (or has the potential) to be successful and profitable, then exploring your options in the alternative lending marketplace could lead to the winning financial solution you want, need and deserve.

Photo: Jake Rustenhoven

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