Micro loans for small business are designed to help business owners obtain the capital they need to succeed. However, owners with bad credit find it difficult to secure the loans they need to operate. Small business owners like yourself with poor credit need to know they still have a chance to access the funds needed to keep their business afloat. Even though your credit limits your options in finding a lender, there are tactics you can use to counteract your low score. Keep reading to learn how to qualify for micro loans for small business with bad credit.
Have A Detailed Business Plan
When you are looking for micro loans for small business, have a detailed business plan ready to present to lenders. Many small business owners use business plan builders to create quality documents. An impressive and detailed business plan is likely to offset the impact your poor credit score has on your approval chances. The funds granted by microloans fulfill the same purpose as those of traditional loans. However, business plans are seen as more important for microloans. This is because lenders hope to see how these smaller funds will precisely fit into your plan. If you can impress lenders with your plan, they may be willing to overlook a poor credit report. To qualify for micro loans for small business with bad credit, have a detailed business plan ready to show prospective lenders.
Provide Proof You Can Pay
To settle the minds of lenders, provide them with proof that you can make payments on your micro loans for small business even though you have bad credit. Provide potential lenders with proof of income in the form of accounts receivable information. Besides proof of income, lenders want to see how long you have been in business. Some lenders require your business to be at least six months old. Others require 2 years or more. If you can show that you have been running a profitable business for a desirable amount of time, lenders may be willing to work with you. If you wish to qualify for micro loans for small business in spite of your bad credit, prepare to provide lenders with proof you can repay them.
Allocate Assets For Collateral
Additionally, in order to secure micro loans for small business with bad credit, allocate your personal or business assets to put up for collateral. If you are not familiar with putting assets up for collateral, review how do small business loans work. Then, you can make well-informed decisions and continue on in this process. Because micro loans are typically for amounts between $500 and $50,000, you do not have to put up your house as collateral. However, a lender may ask that you secure your microloan through your car or equipment used by your business. Prepare to list a number of your personal or business assets to show lenders you are trust worthy. As you prepare to apply for micro loans for small business, allocate assets that you will put up for collateral.
Work To Improve Your Credit
Since you do not have great credit as you begin applying for micro loans for small business, you need to work to improve your credit report. Even though your credit score is less than desirable, showing that you are working to improve it tells lenders you are responsible. All in all, a credit report shows lenders what type of a borrower you were. You need to show them that you have changed. The best way to do that is to begin improving your credit. You do not need an excellent credit score to secure a microloan. Many lenders will be happy to grant you capital if you can show you are responsible. Work to improve your credit to show lenders you are worthy of micro loans for small business even though you have bad credit.
Turn To The SBA
If you truly hit a roadblock in your search for micro loans for small business due to your bad credit, turn to the SBA. The small business administration specializes in setting up business owners with lending institutions. Since the capital is backed by the U.S. government, lenders are more likely to work with you. However, expect higher interest rates if you go this route. That said, if you have exhausted all of your other options, an SBA loan may be your last shot at securing a microloan. If you are not comfortable with a high interest rate, you can still use the SBA. Utilize their services to get an idea of what types of lenders you can look to. When you look for a business loan with bad credit, turn to the SBA to set you up with lenders.
As a small business owner with bad credit, you still have a chance to secure micro loans for small business. To offset your bad credit, provide lenders with a detailed business plan and proof that you can repay the loan. Additionally, allocate personal or business assets to put up for collateral in order to secure the loan. Furthermore, work to improve your credit score to show lenders that you are now a responsible borrower. If all else fails, turn to the SBA for assistance. Even though you have bad credit, follow this advice to secure micro loans for small business.