Qualifying for Minority Business Loans with Bad Credit

A minority business with bad credit will find it is difficult to qualify for a minority business loan. There are services that promise loans to businesses with bad credit and claim to provide a way for a minority business owner to allocate a loan, regardless of credit. However, such companies should be examined closely because most legitimate agencies will require good credit. There are a few things a business owner can do to obtain credit with these companies:

Determine Credit Situation

A minority business with bad credit should first determine the extent of their credit difficulties. Then, the company should try to pay the obligations that are creating the most problems. After approximately six months, the credit score will naturally increase and will help the business qualify for funding in the future.

Obtaining a Guarantor or Co-signer

A guarantor, or co-signer, may be required in some loan situations. Having access to an individual or business that is willing to step in and co-sign for the loan may provide the minority business with the needed assistance to receive the funding or line of credit. This approach requires the business owner to address their long-standing credit issues. Once the company is in a better overall financial position, the guarantor can be removed and the company can take on the debt on their own.

Secured Loans

Another approach can be to find a bank that is willing to extend a secured, or asset-backed loan.  These loans for a minority business require the putting up of cash or some appreciating asset, such as land or a building as collateral for the loan. This places a lot of risk to the minority business who must service the loan in a timely manner, in order to avoid loan default.  

Be leery of offers for bad credit repair or that promise loans regardless of credit history. The criterion for most business loan programs is the credit rating of the business and credit of the business owner. Some of these offers may provide a legitimate offer for a loan, but at a high interest rate and other fees and charges. Others, will require an upfront processing fee that is little more than a scheme to defraud a minority business owner.