Qualifying for Business Loans with Bad Credit

Qualifying for a business loan with bad credit is not possible because lenders have tightened their lending standards and have excluded bad credit from their lending. In the wake of a near collapse of the bank system in 2008, lenders increased qualification criteria for those with good credit.

What is Bad Credit?

Any credit score that the lender deems to be below their minimum credit risk is considered bad credit. Every lender has their own guidelines. All lenders will follow the scores as determined by FICO or Dun and Bradstreet.

Finding a Co-Signer

Having a co-signer with good credit helps the bad credit borrower obtain the loan that they are looking for. The co-signer assumes responsibility for the loan, in the event that the primary borrower defaults on the loan and no longer makes periodic payments. Both the co-signer and main borrower are equally responsible for the payment of the loan.

Securitizing the Loan

Another way in which a business can qualify for a loan is by securing the loan with a business asset that is worth as much as the loan amount. This can include any asset of the business such as phone systems, accounts receivables, equipment and other assets of the business. Securitizing the loan with collateral provides the lender with value because they use the security against the borrower’s promise to pay. As long as the loan is paid back, there are never issues concerning the collateral itself.

Address Bad Credit

A business with bad credit should look to eliminate or reduce the items that are causing bad credit. Starting with the credit report for the business, items that are old or have been addressed previously should be eliminated from the report immediately. A business should also make arrangements to negotiate old debts and make payment arrangements. These steps help the business address their credit situation and eventually help them qualify for a business loan.