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Obtaining a Poor Credit Business Loan

Business owners with poor credit ratings may find it difficult

to obtain a loan for business purposes, such as expansion or to

invest in a new product. Because lenders focus primarily on

personal credit scores for business loans, you need to focus

your efforts on going to the right lender for a poor credit

business loan.

Poor credit business loans are available to business owners who

would not otherwise qualify for a conventional business loan.

Before applying for a lender, take a few important steps to

increase your chances of getting a poor credit business loan.

1. Write a sound business plan. Having a sound business plan is

your biggest asset in obtaining a poor credit business loan. The

plan should be completed and should represent your business in

detail. Pay the closest attention to your business' summary,

which is stated at the beginning of the business plan. The

summary is generally one to three pages in length, and details

your business' management experience, marketing efforts and

goals, business goals, and other information about the business.

If the lender likes what they see in this summary, they'll read

on.

2. Rent, rather than purchase, business space. If you're

applying for a poor credit business loan, look for attractive

business rental property that fits easily into your business'

budget. Lenders favor businesses that rent or plan to rent

business space rather than purchase a building, especially for

businesses that are in the early stages of development, and will

often approve poor credit business loans provided space is

rented rather than purchased. This is due to the fact that

lenders prefer to see a business owner investing in assets that

generate income for the business, such as inventory and

equipment. Lenders also frown on expensive renovation costs to

rental space if the business is a young or start-up business.

3. Review your credit reports. Checking your credit reports from

Experian, Equifax, and Transunion is an important start to the

application process for a poor credit business loan. Your credit

reports can cue you in on what the lender will see as soon as

you apply for a poor credit business loan. When you obtain

copies of your credit reports, review all information, including

your name, address, phone number, and social security number to

make sure that they're all correct. Additionally, check your

listing of creditors. If there are listings that you don't

recognize, report them to the credit bureau.

Additionally, if there are listings that were turned over to a

spouse after a divorce, for example, report those as well. The

credit bureaus will contact the creditors with these disputes.

Creditors are given a 30 day period to respond and verify that

the debt is true, or if they are indeed errors, they are

required to remove the listings from your reports. If no

response is received after you file your dispute, the credit

bureau is required by law to remove those listings from your

reports. Demand that the credit bureau correct these mistakes

promptly.

If your credit report shows legitimate late payments or

bankruptcies, include a letter with your poor credit business

loan application, explaining the circumstances of these marks

against you, and how the situation has changed for you. This can

greatly reduce the impact of these negative listings. Be honest

with the lender! Trying to conceal your past credit problems is

the fastest way to get your poor credit business loan

application discarded.

4. Consider a small lender. Larger banks aren't necessarily the

best place to apply for a poor credit business loan, and in

fact, can sometimes be the worst place to apply. Smaller banks

and credit unions are often more inclined to finance businesses

in their community, even those applying for a poor credit

business loan, and their loan officers are more likely to give

you individual attention and listen while you state your case.

Each inquiry into your credit report generally reduces your

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credit scores by five points, so choose your lender carefully

before applying for a poor credit business loan. Ask the lender

to review your situation prior to pulling a credit report. If

they feel that the proposal shows great potential, while being

honest with them regarding your poor credit, and the lender

feels that the loan could be approved, you've reached a safe

point to move forward and allow them to request your credit

report.

Poor credit business loans can sometimes be difficult to

obtain, so be resourceful on where you get your loan.

A. Consider a home equity loan. For example, home equity loans

can be used for business purposes. However, keep in mind that if

the business fails, you may also be at risk of losing your home

if payments are not made.

B. Consider working with a specialty lender. Some lenders

specialize in poor credit business loans for high-risk

entrepreneurs. These loans usually have high interest rates, but

can sometimes offer a provision for lowering the rate when the

business shows positive cash flow and the borrower demonstrates

the ability to pay the debt.

C. Approach the Small Business Administration. The Small

Business Administration (SBA) has a wide variety of loan

programs to assist business owners and potential business

owners. The SBA does not provide loans, but rather, guarantees a

loan, reducing the lender's risk of loaning you the money for

the poor credit business loan. The SBA also maintains a list of

business-friendly banks. For more information, contact your

local SBA office, or visit sba.gov.

About the author:

Rebecca Game is the founder of Digital Women ®, an online

community for women in business. A 30 year entrepreneur and

dedicated to helping other women find small business loans.

Visit her site: Loans for Women

http://www.digital-women.com