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Nobody likes being rejected. Rejection triggers various emotions; it can make you sad and disappointed and leave you feeling helpless. Nevertheless, during our lives, someone rejected us – for the high school prom, for a spot on a varsity team, a university, a dream job, and a lunch with co-workers. Rejection is also quite common in the business world. Most entrepreneurs have experienced some form of rejection along the way. Small business owners will likely be often told “no” when trying to land new clients, negotiate building leases, or establish partnerships.
Business owners face rejection when applying for loans, especially if they have bad credit. The FICO® score is frequently used by lenders when reviewing loan applications; it ranges from 300 (low) to 850 (high). A FICO® score that is below 580 is considered poor. Balboa Capital understands how frustrating it can be if your business loan request has been denied. However, do not be discouraged, and do not give up trying. Keep reading this blog post to learn how to get a business loan with bad credit.
Realize you are not alone.
Poor credit scores are the number one reason why business loans are denied. Therefore, if you do not meet the borrowing requirements of your lender, there is a good chance that your application will not be approved, and that is nothing to worry about. Just realize that you are one of many business owners across the country who are in the same predicament.
So, stay positive and ask your lender why your loan was denied. In most cases, bad credit is the culprit, but there might be other reasons. These include errors or inconsistencies on your application, excessive debt, or too many hard credit inquiries.
Run a credit check.
Running a business is an ambitious and involved undertaking involving a significant initial investment and ongoing expenses. Whether your business is just starting or has been operating for many years, it has a detailed credit profile instrumental in the loan approval process.
That is why you should run a credit check with one of the leading credit bureaus. It is the only way to see a complete snapshot of your credit history and determine if you are in good standing. If you pay your bills on time and have not taken on too much credit, you will likely have a strong credit score.
Pay your bills on time.
Nothing worries a lender more than a business owner who is not paying their bills promptly. If you are having difficulty paying your suppliers and bills and have a bunch of late payments on your credit report, your chances of getting a loan will decrease significantly. Before applying for a loan, check to ensure all your accounts payable are current.
Do not try to borrow too much.
Unless you have a large amount of equity and a strong cash flow, borrowing too much funding might prevent you from getting a loan in the future. Banks, credit unions, and direct lenders prefer extending loans to business owners without debt due. The more money you owe, the more you will have to pay monthly. Look at ways to consolidate to reduce the amount of debt your small business is carrying. Doing so might work to your advantage when it comes time to apply for a loan.
When evaluating the various available business options, pay close attention to their qualification requirements, interest rates, and repayment terms. Also, check to see if there are any fees any prepayment penalties. Taking the time needed to research loans can help you narrow your choices to pick the most manageable business loan.
Balboa Capital, a Division of Ameris Bank, is not affiliated with nor endorses FICO. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.