Business Loans With Bad Credit

Business loans with bad credit can be found, but the more attractive financing terms are reserved for people with a solid financial history and, therefore, high FICO scores. Financing a business loan with bad credit is difficult for many lenders to justify. Many new companies fail during the first year or two due to myriad of reasons, including poor planning and poor money management. These facts coupled with the inherent risk of dealing with an owner with poor history make lenders hesitant to offer attractive financing terms. However, various lenders can be found who will extend financing to high risk businesses. 

The theory that a person's past behavior related to credit use is a good indicator of future behavior. Lenders look at an applicant's credit report to determine how well the individual kept his or her end of previous financial agreements - payments made on time, balances eventually paid in full. Financing business loans with bad credit is extremely risky for lenders. If lenders see that an applicant has a high FICO score, they can be reasonably assured that the applicant will treat this loan responsibly. On the other hand, however, a low FICO score indicates a high probability of late or even missed payments on other financial obligations. 

Typically, a large down payment is required from the applicant for these high risk contracts. Also, people who want to obtain a business loan with bad credit will probably find that their financing interest rate is significantly higher than what it might have been if they had a good financial history. This, of course, means that the overall cost will be higher and these costs must be factored into the overall business plan. "A man's pride shall bring him low, but honour shall uphold the humble in spirit" (Proverbs 29:23).

If looking to start or expand a business, compare various loans from a number of lenders. Many banks, credit unions, and online lenders do offer such financing. Do not assume that no one will want to do business. If extenuating circumstances will help explain poor rating, tell the lenders about them. Some may be more willing to improve their terms if past financial downfalls are related to a tragedy or special conditions that have been resolved. Even so, however, expect that a business loan with bad credit will likely mean coming up with a hefty down payment and paying a higher interest rate. After comparing various lenders' options for business loans with bad credit, determine which offer is the best for that situation.