How Can I Get a Business Loan If My Credit Is Terrible?

You’ve decided to grow your existing business, but your poor credit score might hamper your chances to avail a business loan. While it is true that traditional lenders may overlook your business loan application, there are more options from alternative finance providers, likes NBFCs that you could consider.

So what’s this whole brouhaha about credit score?

Your three-digit numbered credit score, ranging from 300 to 900, contains public and private information to help lenders make credit decisions. It includes the number and types of accounts you have, your available credit, length of credit history and payment history.

Some finance providers require a minimum personal credit score ranging from 550 to 650. Some don’t have any such minimum credit score requirement.

How are alternative lenders evaluating?

Lenders, like Bajaj Finserv, look beyond your credit score while checking your business loan eligibility criteria. They put more emphasis on your company performance, balance sheets, growth plans and your actual revenue. The factors include:

        Your business plan/strategy

        Gross monthly sales

        Profit margins

        Capacity to grow

        Total revenue

With several options available, you can avail a business loan for your working capital requirements. Let’s take a look at some of the options:

Unsecured business loan
Many companies opt for unsecured business loans when they’re unable to get a traditional loan from the bank. These loans are approved without the need for any collateral. You borrow a fixed lump sum to be paid over an agreed time period.

Bad credit loans

While therate of interest on business loan may be higher than others, bad credit loans are offered to borrowers with poor credit score. NBFCs prefer businesses with a robust bank balance and good profit margins.

Friends and family

For many entrepreneurs who are starting fresh and are in need of cash can borrow funds from their friends and family. Do make sure the loan agreement addresses all the basic terms in order to maintain transparency and to maintain the relationship(s).

Grants

Government-friendly policies have made the environment conducive for entrepreneurs to thrive. You may consider various government grants available for your business requirements.

Business cash advance
You can go for a cash advance option for your business wherein you repay the loan, at the same rate, from the money you get on sales. The lender takes a percentage from every sales transaction.

Asset finance
For an asset-based business that purely deals with machinery, technology, vehicles or equipment, NBFCs offer asset-based finance at a much lower risk level as the security inherently becomes a part of the lending process.

Crowdsourcing
You may look at crowdsourcing as a viable alternative for your business needs. It entails getting work or funding done from the vast human capital in an online platform.

Approach the lender with a detailed business plan. This will surely aid in your discussions with the finance provider, who’ll get a clear understanding of the investment requirements. There are a lot of other elements crucial in the loan application process apart from your CIBIL score.

Also Read: How to Improve CIBIL Score for Business Loan

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