You've been looking for a loan for your small business but can't get approved. You're not alone. With the rising number of people who have undergone personal bankruptcy or foreclosure, it's no wonder lenders are becoming more cautious about providing capital to startup businesses. This is where you might find yourself feeling hopeless and unsure if you'll ever be able to take the next step in your business.
But worry not! There are many ways you can get the funding you need to help your small business prosper. Here are some options that might work for your situation and how to improve your chances of being approved for a loan in the first place.
In a recent survey, it was found that 88% of small businesses that applied for loans in the last five years were denied. That's an alarming number, but one thing you can do to increase your chances of being approved is improving your credit score.
Many lenders look at your personal credit score when deciding whether to approve you for a loan. If it's below 600, you might want to consider looking into developing or rehabilitating your credit before applying for a loan.
Another reason why a business might be denied a loan is because they don’t have enough collateral to back the loan up. If this is the case, then there are some options that might work for you. For example, if you have equity in your home, you may be able to use that as collateral instead of cash or property.
If all else fails and you find yourself getting rejected time and time again, don't give up! There are still ways in which you can get funding for your small business with no credit history at all!
If your credit is poor, the first thing you need to do is get it back on track. Start by getting a copy of your credit report from each of the three major bureaus and review them for errors or mistakes. If you find any, dispute them with the credit bureau and keep a record of every letter you send.
It's also important to stay current with your payments if possible. Make sure to always make your monthly payments on time and never miss one. If you're unable to pay something in full when it's due, try to set up a payment system with the creditor that makes sense for you financially. You can also use consumer protection services like those offered
by Consumer Credit Counseling Service of Greater Houston (CCCSGH) if you are having trouble meeting your obligations.
One of the most appealing reasons to apply for a small-business loan is that it can be used as collateral. Your loan will function as security, and if you fail to repay your debt, the lender can take or sell your collateral in order to recoup their losses. Unfortunately, not all businesses have assets that qualify as collateral.
If you’re looking to get a small business loan from a traditional bank, you may find yourself in the same position as many others who are turned down for not having the best credit history. However, there are a few things you can do to improve your chances of getting approved for a loan in the first place.
First, make sure that you have at least two years of steady income. If this is not an option for you and you need immediate funding, consider finding an alternative lender that might be able to work with your situation such as a peer-to-peer lending company or public banks like Grameen Bank. These types of lenders typically offer loans at lower rates than traditional banks and without requiring collateral.
Another suggestion would be to start by applying for smaller loans through traditional banks or credit unions before applying for larger ones. You may find that once they see how reliable and responsible you are with managing your money on the smaller loans, they will be more likely to approve your application for a larger one.
One final tip is to always keep an updated copy of your credit report on hand when applying for loans from any type of lender so that they can assess your risk level and determine if they're willing to work with someone who has had less than perfect credit in the past.
Strategic advice on navigating businesses funding, from experts.