Business Loans are loans taken by individuals, or enterprises, to start a new company, expand an existing one, or fund daily business operations. Such business loans today are common practice especially among manufacturers, traders, retailers, and start-ups. The purpose of these loans may vary from loans for expansion, which could mean a purchase of plant and machinery to meeting working capital requirements. Such loans are also available for managing cash flows, training employees, hiring staff, emergency funding, and operations expansion.
Whatever be the purpose of the Business Loan, the primary approval will depend on the credit score of the company or enterprise. If you are an owner, a proprietor, or a board member of an existing company, your credit will not be the factor for the approval of a business loan. On the contrary, if you plan to start a new business, the approval will depend on your personal credit history. This goes to mean that if you have a bad credit score, your loan will be rejected. On the other hand, if you are applying for a loan for an existing company, the loan will depend on the credit history of the company, and not your credit score, or the credit score of any other member of the business, and the loan could be approved if the company has a good credit history.
As a norm, banks, NBFCs, and other moneylenders consider a score of above 700 good for business loans. This does not mean that if credit scores were low, the loan would be completely denied, but would mean that the process would be a little more cumbersome while deciding on interest rates. You could find your credit score and rating at Ruloans Credit Score Calculator right away, and if the score rates bad, here are some tips and suggestions on how you could get a business loan with bad credit.
- Try Getting a Secured Business Loan
If you’re planning to start a new venture, pledge an asset or property as collateral to get a loan. On the other hand, if you’re running an existing business, ask the lender if you could get a loan, if you pledge an asset of the company. Don’t forget to check the interest rates.
- Approach a Bank for Help
Though individuals and businesses are a no-no for banks, your application would be certainly looked into if you were willing to agree with their terms and conditions. Convince the bank to approve your loan for a higher than regular rate of interest.
- Try Approaching a Non-Banking Financial Corporation (NBFC)
While Banks might be reluctant to offer you the loan you want due to reasons of your creditworthiness, NBFCs perhaps could be convinced to see beyond your credit score and credit report by combining data and technology for approval. Of course, the interest rates may be a little high based on your business plans.
- Ask your Bank for an Overdraft Facility
Ask your banker to extend you a credit line with an overdraft facility, where the interest rate would be calculated on the utilized amount from a sanctioned amount. If you’re banking with your personal account, and your business current account at the same bank, you would stand a better chance of getting that line of credit.
- Get a Business Credit Card
Sometimes, getting a business credit card may be easier than obtaining a loan since interest rates associated with such cards are high. Obtaining this line of credit would depend on your payment history.
- Go Online for a Web-based Lender
Across the web, there are lenders looking for people with bad credit rating in need of urgent funds. These lenders are not traditional lenders who analyze your creditworthiness based on banking systems. You could get your need fulfilled quickly here despite your bad credit report.
If all this fails, you might try looking for microloans offered by microlenders, or revenue-based lenders, or even peer-to-peer lenders, or ask a Ruloans representative for a great deal!