It will certainly be difficult for you to obtain a loan if you have poor credit rating because of your business struggle or financial difficulties. But due to the constant changes in the financial world, some lenders are granting small business loans for people with poor credit because they understand that this is happening more and more every day.
There are two types of loans available for small companies: Secured and Unsecured Business Loans
If you have bad credit, the best choice is going for a secured small business loan. The backup you can use to obtain these type of loan can range from inventory to equipment, from property to accounts receivable. The lender will start taking stuff from your business as long as you are unable to pay them back.
This type of loan is only for the desperate. The interest rates charged (30+% at times) can easily drain away all profit. Only apply for it if you are in one of these situations:
- a) You have nowhere else to turn for a cash infusion,
- b) You are sitting on a sure thing and looking to grow rapidly.
You need to be extremely cautious because there are lots of people who will take any opportunity to take advantage of you and offer unsecured loans, you don’t want to be linked with them. Make sure that the institution is legitimate and approved by the Better Business Bureau.
Before having to borrow a secured or unsecured loan or even if you want to avoid them, consider asking for a loan from your family or friends. You don’t even have to go for the typical small business loans if you have relatives that believe in your skills. Either way, you should put it in writing to stay safe and don’t be late on payments, because it can cost you both friendship and business.
