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| Business Loan Bad Credit - Are There Any Options? |
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If you need a business loan bad credit will create some problems for you. If you know that your business has a poor credit rating, you may be wondering if there is any way you can qualify for small business lending. While finding a small business loan source when you have bad credit may be more challenging than it would be if your credit were perfect, there are options out there for you in spite of your situation.
If you have a good personal credit rating you could forgo the whole business loan bad credit problem by using personal loans and credit cards to fund your business needs. However, this does not help you raise your business credit history. Also, it puts your personal assets at risk if you should someday close your business and be unable to pay back what is owed. It is a better option to look for a small business finance option that leaves your personal finances alone.
The best option for those struggling with a poor credit rating while needing small business loans is to apply for a SBA small business loan. These loans are guaranteed by the Small Business Administration, a government agency that works to help small businesses get started. There are several different loan programs you can consider with the SBA.
The most common federal small business loan program is the SBA's Basic 7(a) Loan Guaranty Program. Under this program, small business owners apply for financing with SBA partner small business lending companies, which are often traditional lenders who have chosen to work with the SBA. Then, the lender processes the loan application and sends the information to the SBA. The SBA will guarantee the loan for a certain percentage, if it is approved. This means that the business loan's risk value is far less because it will be repaid in part by the SBA if the borrower defaults. The bank then gives the money to the borrower, who makes payment back to the bank based on the agreed upon repayment plan.
The SBA also offers special business loans for women, minorities, and veterans. In these loan programs the applicant can be pre-qualified by the SBA for a 7(a) loan before heading to the bank. This makes it easier to get approved by the bank, because the lender knows the loan will be backed by the Small Business Administration.
The SBA also has VA business loans that are designed for veterans and their spouses. These loans make it possible for veterans and their families to start small businesses in spite of poor credit ratings. This program is known as the Patriot Express Small Business Loan.
As you can see, there are many small business loans that are available to those who are struggling with poor credit ratings. The point is that you need to be creative and use the resources that are available for you before you assume that you cannot get a loan. When applying for a small business loan bad credit does not have to mean you have no options.
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