If you’ve had some credit problems in the past, especially while trying to run a business, you may feel that you cannot get a loan for your business. If you need a small amount of money for operating expenses, getting a business credit card may be a better choice than trying to get a commercial loan. But if you need a commercial loan and have bad credit, it is possible. You just may have to jump through a few hoops.
You will be seeking a “bad credit commercial loan,” and you should be aware that these loans are a little more expensive than normal commercial loans. But when this is what you need, it’s what you need.
First, look for lenders who specialize in, or at least deal with a lot of, bad credit commercial loans. They will understand what you’re asking for and be more likely to loan you money than lenders who don’t issue a lot of bad credit business loans.
You will likely have to borrow a minimum amount of money. This may seem strange on a bad credit loan, but lenders want to make sure they lend enough to get a substantial profit back on the interest. In most cases, the lower limit is $5,000. The upper limit, of course, will be determined by your lender and will vary based on your situation.
You may have to have the loan payment paid automatically by credit card monthly. This is not a problem if you have a credit card with a sufficient available balance and you can make the monthly payment. It could be a problem if your credit card cannot absorb the payments and you do not pay off the payment on your credit card each month. Consider how you will repay before you apply for a loan.
You may also have a very short time to repay the loan. Often, for a loan of $5,000, the lender will expect complete repayment in one year. If this is going to be too difficult for you, you should not apply for the loan. Once you take out a bad credit loan, if you default on that, your credit will be well and truly ruined.
Watch for additional charges, as well, such as fees of various kinds. Understand exactly what you’re going to be paying on your loan. Expect high interest rates because of your credit situation, and understand exactly what you’re getting. Shop around and compare loans from two or three lenders to get the best terms.
In a perfect world, you would be able to get a commercial loan without all these inconveniences just by proving that you’ve overcome your prior difficulties. You wouldn’t need a bad credit business loan. Unfortunately, in this world, you will have to apply for a bad credit commercial loan under certain circumstances. The good news is that once you’ve repaid this loan, you will be in a much better position the next time you need access to business capital.