If you are planning on starting a business or you’d like to expand your current operations and buy new equipment, you’ll probably need a loan to help out. Having poor credit history is not going to look good when you approach a bank or credit union looking for funds. They’ll quickly reject your application and leave you back at square one. If you are wondering what to do, consider these options.
Dismiss Traditional Lenders
Traditional lenders are banks, credit unions and building societies. This is the place where most businesses and individuals go to borrow money when they need funds. In most cases, when you approach an alternative lender, financing will be based on the 4 C’s.
- Credit History
- Cash Flow
If you are looking for small business loans with bad credit, you’ll be immediately dismissed from the list as you don’t meet the 4 C’s criteria. Out of the four listed above, most traditional banks only focus on your credit history if this is bad they won’t ever consider the other three. When your application is submitted into the system, it goes through an automated decision-making process, which means you won’t make the cut.
Established banking institutions have minimised the labour involved in loan applications. Even if you have a great business and you are doing well, the system doesn’t work in your favour if you’ve bad credit.
You could have collateral, a business that works and a strong character, and still get rejected because of poor credit history.
Alternative lenders don’t originate from traditional banks. They basically operate outside of the bubble of commercial institutions. The concept is fairly new, and these types of lenders have focused on helping difficult clients who struggle to get loans approved by conventional lenders. There are number advantages to using alternative lenders to secure funds.
- Quicker Access to Funds – They offer more flexibility and a quicker loan application and processing system.
- Higher Approval Rates – There is a higher chance of getting approved.
- Less Details – There is a much smaller amount of paperwork.
When you have poor credit history, you’ll struggle to get approved by traditional money lenders like banks and credit unions. The way the system is set up means anyone with poor credit is automatically eliminated from the screening process without any consideration of current cash flow or collateral.