Bad credit business loans are loans awarded to companies that possess a credit score of 650 or less. When qualifying a candidate for a business loan-when checking their company profile to determine them worthy of receiving funding-a lending institution will view the company’s credit history, their ability to make money, and the overall health of the business. For those companies who have had slight trouble paying off their debts, a bad credit business loan may be the only avenue for financing. In total, acquiring a business loan is not an easy feat for a company with a bad credit rating.
For young businesses or those who experienced financial troubles in the past, bad credit is a common plight. Many entrepreneurs or individuals starting a company learn that their initial funding attempt was only helpful in establishing their business plan. Expansion, however, and the presence of maintenance required additional funding which is not available through the business itself.
The odds of secondary financing lie heavily in the company’s credit history. If a company has shown, throughout its past, that it is unable to pay off loans, it will quickly get rejected from receiving even a bad credit business loan. Factors such as personal credit will damage one’s ability to be approved for even bad credit business loans. In total, the lending institution will look at a combination of both business credit and personal credit history.
Given the state of the economy, the probability of requiring a bad credit business loan is highly limited. That being said, the instrument still exists and is available to those companies who can show valuable characteristics.
A healthy business plan or an influx of future capital will enable an entity to receive a bad credit business loan. If these characteristics are present, the lending institution will cover their risk through the presence of exorbitant interest rates, a mandatory down payment, or an alternate length of the bad credit business loan. In addition, the amount of the bad credit business loan is typically less than a regular loan awarded to a company with a strong credit history.