Many small businesses in Australia have grappled with the issue of bad credit loans at some point. And, over the years, finance experts have emphasised the need to spread awareness about business credit scores and their importance.
For instance, a survey showed that over 93% of businesses haven’t bothered to keep tabs on their credit scores. Consequently, they end up with unhealthy credit scores, turning the process of getting a business loan into an arduous task. However, there are still ways of landing a business loan with bad credit. Keep reading this post to find out how.
The Five Ways of Getting a Business Loan on Bad Credit
From doing meticulous research on banks and money lenders to chalking a solid plan, there are many things you can do to work your way around the obstacles posed by a bad credit score.
- Do Your Homework
On a scale of 1200, a business credit score below 500 is a red flag, one that can make many banks think long and hard before approving your loan request. However, you can still have a handful of them whose credit score requirements are lenient. So, try to find such banks and build your loan applications accordingly. Applying to places whose requirements you don’t meet is just a waste of time and effort.
- Create a Convincing Plan
If you want your bank or money lender to look beyond the bad credit score, it’s going to involve some serious convincing. That’s why it would help to go in with a solid business plan. So, create a plan that can attest to your business goals, targets, revenues, etc., before applying for a loan.
Also, your plan should cover bases like why you need the loan, how you plan to use it, and how the loan can help in revenue growth.
- Be Wary of High Interest Rates
Before plunging into planning, get accurate information about the interest rate you’ll be charged. Most often, the equation is this: lower the credit score, higher the interest. So, if you find the rates to be exorbitant, don’t take the loan. If you don’t need to take out a business loan urgently, you can work towards improving your credit score instead.
- Tap Into Alternate Funding Sources
Let’s say that you need a loan urgently. And it would be better to borrow money from family, friends, or business partners in such situations. Although, ensure that you make the most out of the loan and simultaneously do everything you can to improve your business’s credit score.
- On-Time Bill Payments
Suppose your business has a bad credit score. Then, how can you prevent the score from dropping further? By paying all your bills on time! Workspace rent, electricity, water, gas: don’t fall behind on any of the payments.
Meanwhile, if you can do without some of the services that you’re regularly paying bills for, it would be best to discontinue them. This way, the savings of your business will compound in the long run.
When it comes to loans, business credit scores play an essential role. And while it is better to maintain a good credit score, getting a business loan with bad credit is not impossible either. So, by doing sufficient research on banks and lenders, staying on top of all bill payments, creating a solid plan, etc., you can get a financial reprieve and jump into nudging your business credit score into the ideal range.