According to data generated by the credit bureau Experian, 30 percent of people have bad credit (i.e. scores lower than 601), and when you include the number of people who have little or no credit history, the proportion of credit-challenged individuals surges even higher.
In the past — which on today’s lending landscape is generally defined as pre-Great Recession of 2007/2008 — while banks didn’t necessarily open the business loan floodgates to applicants with bad or impaired credit, they were generally receptive and took a longer-term view which meant more loans were issued. It was understood that business loans weren’t and aren’t limited to borrowers with great credit.
However, things are very different today. Big banks have all but fled the small business lending marketplace, with approval rates hovering around a dismal 10-20 percent. That means trying to secure business loans with bad credit is virtually impossible. That’s the bad news.
The good news is that established and reputable alternative lending companies such as National Business Capital have stepped forward to fill the business loans with bad credit gap. In fact, we approve about 90 percent of all applications.
Does this mean that we don’t care about credit scores? Not exactly. It means that we recognize that many smart and successful (even if they aren’t yet profitable) business owners have bad or impaired credit. This doesn’t necessarily make them a risky investment or a “bad bet.” In fact, it may not mean anything material at all.
With that being said, here are three tips to help you get a business loan with bad credit:
- If you’ve applied for a loan before, find out why your loan application was declined – Many business owners who come to us looking for a bad credit business loan have applied for a bank loan first and been denied funding for aforementioned reasons. If you’re in the same boat, once you can determine why a loan application was turned down, you can decide whether it’s something you can change or not. For example, if your loan application was denied because your business plan was not thorough enough, this may be worth fixing and re-applying. If your loan application was rejected based on your credit scores, this could take years to change, so it is time to look for another lender or funding program.
- Seek out more accepting lenders – When you are browsing potential lenders’ websites, look to see if they mention accepting business loans for those with low credit or if they have special programs dedicated to this. You can also see how accepting a lender is by checking their website for an approval rate. While banks typically have an approval rate around 10-20%, alternative lenderslike National Business Capital accept around 90% of loan applications. This means your chances of receiving loan approval are much higher with NBC than with a bank!
- Decide on the right loan program – While your lender should work with you on this decision, applying for the right loan can make all the difference in terms of approval. From cash advances to working capital loans, you have many options. Check out our recent blog “An Overview of 5 Popular Types of Business Loans” to help narrow down which loan program is right for you.
At National Business Capital, our perspective is forward-looking. We are far more interested in what a business owner has planned for the road ahead, since that is where they will succeed: in the future, not in the past. And the fact that we are one of the country’s most successful alternative lending partners speaks to the soundness of this policy and approach. In other words, if lending to borrowers with impaired or bad credit was reckless, we would have been out of business years ago. Instead, we’re thriving. This isn’t luck. It’s logic.
If you’re searching for business loans with bad credit and finding that instead of a warm handshake your bank is giving you the cold shoulder, contact the National Business Capital team today. Your consultation is free, there is absolutely no obligation or pressure, and we will clearly and thoughtful answer your questions with no confusing jargon. We believe in helping small businesses — and small business owners — succeed! Start by filling out our two-minute application, and we’ll help you find a loan option that’s right for your business.
For more information on how to get business funding when banks say “no,” download our FREE eBook today: