Qualifying for a Term Loan with Bad Credit

If you are searching for a term loan for your small business, and have bad credit bad personal credit, you will find that your options for loans will be severely limited. Also, if your small business is relatively new, you will generally find it very hard to qualify for most types of business term loans because most banks will require that a business owner provide a personal guarantee. The personal guarantee includes a personal credit history review for the owner of the company. If your business needs financing and you have poor personal credit, there may be several options available.

Options For Well Established Businesses    

If your small business has been in operation for a number of years, and your business has an overall good or excellent business credit record and payment history, some banks may be open to providing a business term loan solely in the name of the business. Before submitting a business term loan application, you should always check with the bank and ask what about their approval requirements.

Business Cash Advances

You may also want to consider business cash advances. There are lenders that will make unsecured business loans to small businesses - even when the owner has bad credit. Business cash advances require that a small business accept credit cards for purchases at their place of business.

Many cash advance lenders will provide unsecured loans up to $250,000, based on your small businesses monthly credit card sales volume and future credit card sales projections. Unlike term loans, these types of cash advances do not use amortized payment schedules. Rather, payments received from customers that pay with credit cards are simply redirected to the lender.

However, you should be aware that these types of cash advances are generally only offered at fairly high interest rates and may also significantly hamper the cash flow for your business since all of your credit card sales will be redirected to the account of the lender and not your business bank account.

Consider Extra Collateral

Some banks may consider providing business term loans to your small business, even if you have bad credit, if you provide ample collateral. Banks are in the business to earn money or profit with interest rates charged for loans; however, they must always evaluate the potential risk or possibility that a known may not be repaid.

Therefore, many banks can be quite strict about credit requirements for business loans. However, if you are able to provide collateral that is worth more than the amount of the loan you are requesting, many banks may consider approving the loan - regardless of your credit history. However, you should keep in mind that the collateral offered will generally need to be able is the sold very quickly at a price that fully pays off the term loan and makes the bank whole all at once. While this type of loan obviously involves risking something of greater value to you and your small business, it can help you get approved for a business term loan when you otherwise might not qualify.