Can You Get a Business Loan with a Bad Credit Score?

Getting a business loan can open up a world of opportunities for your business. Need new equipment? Need to get working capital to fulfil a particularly large order? Need to hire some help to meet a surge in demand? Maybe you just need some money to cover general expenses until your business is more profitable. 

Whatever your need is for a business loan, you may have wondered: Can you get a business loan with a low credit score? The answer is yes – you can get a business loan with a low credit score. However, there are several considerations you should examine:

Your terms may be less than ideal

If you have a bad credit score, you will not get the same business loan terms that you would get if you have a great credit score. For instance, your interest rate will be higher. You may not be able to get as much financing, and may not get as many years to pay it back. Also, you may have to offer some additional comfort to the lender that they will get their funds back, for instance, in the form of collateral or a personal guarantee. 

You may have to give collateral

Collateral is something that you are offering as security for repayment of a loan. You will lose this collateral if you do not pay back the loan. Collateral could include machinery, revenue streams, inventory, or other assets. If you have a bad credit score, there’s a good chance that if you are willing to give some of your business assets as collateral, that you will be able to get a business loan.

You may have to give a personal guarantee

To get that business loan with a bad business credit score, you may have to give a personal guarantee. Be very careful giving a personal guarantee – banks love them for a reason. Giving a personal guarantee means that if your business is unable to repay its debts, the bank can go after your own personal assets in order to recuperate their funds. This could include your home! There are circumstances which may warrant giving a personal guarantee in order to get financing, but you should be very aware of what the risks are of doing so.

You may want to consider alternative financing options

It may be harder to get a business loan by walking into a traditional bank, but there are definitely other options available to you. For instance, you could take advantage of factoring – which is essentially selling your receivables at a discount to someone else. You can also consider online crowdfunding. With crowdfunding, you raise money off of your ability to mobilize a larger group of people around a compelling story. Most platforms don’t look at credit scores in crowdfunding campaigns. 

You can also consider net credit loans for bad credit. Essentially, this is supplier financing that can help you buy on credit from suppliers. Not only might this help you get some necessary supplies when you are short on cash, but paying off these net credit loans will help your business improve its bad credit score. 

Also, consider good old fashioned “friends and family” financing, where you borrow money from people that you know. Finally, there are online lenders that focus on more creative financing solutions, or underwriting procedures, that allow you to get financing even with a bad credit score. Time to do some sleuthing to find the best option for your business!

Consider improving your bad credit score

Why not just change your circumstances? A bad credit score is not written in stone! It can be easier to turn a bad credit score into a good credit score than you think. Here are six tips on how to improve your business credit score.

CreditPush has excellent tools to help you build your business credit score, and these tools are free. Sure – you can get financing with a bad business credit score – but you will get better financing with a great business credit score. Putting in a little bit of legwork could pay off tremendously.

Vlad Hordiychuk is the Product Owner of CreditPush. He has held leadership and managerial positions in fintech, information technologies, and global supply chain ventures. He is trilingual, has a business degree from Ivan Franko University, and has Google digital marketing certification. He spends his free time walking his dog Space and ballroom dancing.