Qualifying for a SBA MicroLoan with Bad Credit

There are several different SBA microlenders who have funds available to help new and existing businesses, but the loan requirements will vary from lender to lender. An SBA microloan is a loan for the business that requires $35,000 and does not need the funding to pay off, or consolidate debt, or real estate. Since the SBA is the organization providing the money to the private microlender, the microlender is free to designate their loan terms according to their risk ability.

The SBA microloan and Bad Credit

If bad credit is an issue, many microlenders are non-profit organizations and smaller community banks which can mean that you are more likely to be able to get a loan with bad credit. Your loan amount may be smaller and you may have higher rates, but the loan will be available. Also, you may need collateral or a cosigner.

SBA program and Other Small Business Loans

This loan program is different from other small business loans because lenders are willing to consider other criteria, in addition to credit scores. Many other lenders disqualify you automatically with a  bad credit score.

With the SBA microloan, if the borrower's business meets the other requirements such as, two years industry experience and business training, lenders are usually willing to work with borrowers to offset a negative credit report. They will consider the loan as a whole and weigh other factors when determining whether or not a business will get the loan.

If the bad credit borrower has a good business plan and training, they may be approved in spite of the bad credit rating. For those with bad credit, it is best to contact the microlender before applying for the loan to get a full listing of all requirements. Take time to ensure you can meet these requirements and explain all bad credit marks before actually applying for the loan. Don't be afraid to apply to more than one microlender.

These loans are smaller than typical loans, and therefore must be paid off more quickly--generally no more than six years from the original date of disbursement.