It may seem like an impossible feat to attempt to get business loans with bad credit. While it is true that the health of your credit score can affect your chances of getting a business loan approved, bad credit does not have to mean the end of your business. Poor credit can signal a myriad of things to a lender – lack of or poor financial management skills, not enough revenue, among others – but don’t allow them to define you. There are still options out there if you are struggling with your credit.
Bad Credit and Business Loans 101
If you have ever applied for insurance, a loan, a credit card, or a job, you should know that Consumer Reporting Agencies (CRAs) collect information about you in order to give the final say on the financial decisions you make. This information allows lenders to assess risk – how likely it will be that they will receive a return on their investment. Your credit score is the first impression you give of yourself and your business when applying for a business loan.
Breaking Down Your Business Credit Score
While there are several different types of credit scores (Experian, FICO, etc.), it is important to note that personal credit scores are different than business scores. General guidelines state that personal scores range from 300 to 850, whereas business credit scores only range from 0 to 100.
Using the Dun & Bradstreet PAYDEX, a score of 80-100 is considered good. People with scores in this range tend to have an easier time securing financial assistance and being approved for loans. A score of 50-79 is considered to be fair, and a score of 49 or below is seen as bad. People with scores in this range generally have a more difficult time applying for loans and getting any financial assistance because they are seen as a higher risk to lenders.
Experian’s Intelliscore Plus divides scores into five categories – 1-10, 11-25, 26-50, 51-75, and 76-100 – separated by “risk class.” Whatever the way you determine your business credit score, if you find yourself on the high-risk tail of the chart or in the “bad” group, don’t worry – you still have a chance.
What to Do if You Have Bad Credit and Need a Business Loan
If you find yourself in the “Fair” or “Very Poor” credit score range, do not give up. First, make a plan – this checklist from the US Small Business Administration can help! Then, find a lender that understands your situation – shop around and don’t settle!
First Capital Business Finance offers an excellent Asset-Based Direct Lease Program that can help you get what you need. Instead of using your financial history and information against you, First Capital looks at your information and history with a different perspective, pointing out the strengths in your organization’s management, operations, and other key aspects of your business. We work with you to help you access the funds you need to grow your business.
Contact First Capital to Get Pre-Qualified Today!
No matter your credit score, if there’s a will, there’s a way. Let First Capital turn your “brick wall” into an opportunity by contacting them at 888-565-6692. You may also contact us online, and we will respond within 24 hours.