Before approving your loan, most financial institutions like banks do a rigorous background check process on your credibility as a borrower to determine whether or not you can make timely payments in the future. If you were in their shoes, you'll understand that it's just wise and reasonable to do so. Unfortunately for a borrower trying to bounce back from a financial setback, a bad credit history can hurt your reputation and chances of getting approved. But don't lose hope yet if you deem that getting a loan is the only option to leverage your small business. While difficult, it's not impossible. And that's what we're going to talk about in a bit.
What is Bad Credit Anyway?
Bad credit is a record of a person or company's failure to make timely bills payment. It also works as a prediction of their likelihood to make timely payments in the future. After all, if you failed to fulfill your payment obligations on time in the past, what is the guarantee that you'll be a more responsible borrower in the future? Thus, if you have bad credit, it is difficult to process new loans, regardless of their type, whether secured or unsecured.
For reference, credit bureaus consider a low credit score that falls somewhere below 580 on a scale of 300 to 850 as bad credit. Meanwhile, a credit score that falls somewhere from 670 to 739 is rated good. 740 to 799 is very good. And finally, if you have a credit score that falls somewhere in the range of 800 and above, it is considered excellent.
Can You Get Approved with Bad Credit?
Yes, as mentioned, it is not impossible to get a retail business loan even with a poor credit rating. We've got tips to set you up for a successful loan application.
Look for Several Loan Options
When it comes to business loans, banks are not the be-all and end-all of things. You can look elsewhere to increase your chances of getting approved if it's difficult to borrow money from banks with bad credit.
For example, the different installment loans CreditNinja offers are easier to process. Your request can get instantly approved as fast as 24 hours regardless of whether you have an excellent or poor credit score.
Improve Your Credit Rating
Before applying for a loan, sit down and calculate the expense. Does your business urgently need additional funding? Perhaps, you can wait for a little more time. If so, use the time wisely to improve your current credit score. Here are a few things you can do.
- Set up automatic online payments for your credit card bills so you can consistently pay on time.
- Raise your credit score by paying more than the minimum due required on or before the due date.
- Prioritize paying off debts with the highest interest rates. It will help raise your credit score faster. Aside from that, freeing yourself from these obligations will allow you to save extra cash for more important expenses.
Come Up with a Feasible Business Plan
The goal of this business plan is not just to keep your branding, business activities, and goals more structured. A good business plan also showcases how profitable your business can be. At the same time, it will help convince the creditor that you can pay off your loan on time using your business revenue.
These are the key things you should include in your business plan:
Detailed Description of Products and Services
How do your products and services benefit your target customers? What are the unique selling propositions that set these apart from their counterparts in the market? Are there current research and development studies underway to help improve these existing products and services?
Who is the target market of this business? What are the customers' demographics? In addition to answering these questions, include statistics-based industry projection to demonstrate the ability of your business to increase its profit in years to come. Furthermore, describe your direct competitors, showcasing their strengths and weaknesses. Then, show how your business fills the gap in the industry.
Provide a detailed marketing plan that showcases how you will employ marketing strategies to promote and grow your business.
Organizational Structure and Management
By showing the credentials of your management team to creditors, they can be more confident of the future success of your business. If you consult professionals in accounting and law firms, mention that too.
If your business has already existed for a year or more, show creditors your detailed cash flow statements, tax returns, and other useful financial documents. Additionally, it will be helpful to show research-backed income projections for the next few years.
Find a Co-Signer with Good Credit
Perhaps, you can find a business partner who has a very good or excellent personal credit score. He can also co-sign the loan application. Doing so will increase the chances of your application getting approved.
Secure Your Loan with a Valuable Asset
Valuable assets such as real estate properties and cars can serve as collateral to secure your loan. Collateral serves as protection for the creditor. In case you cannot pay off your debt, they can sell the collateral to recover from the losses.
You Can Get a Retail Business Loan with Bad Credit
It is possible to get a retail business loan with bad credit as long as you can demonstrate your ability to pay off your debt using your business revenue or from other income sources. There are creditors offering installment loans for bad credit and you can get approved almost instantly. So you can opt for any of them instead of banks, and follow the aforementioned tips before applying for a retail business loan. And finally, ask yourself once again whether you need the loan urgently or you can still wait a little more. If you aren't confident enough that you can pay off your loan on time, it's better to postpone it for later rather than drown in an endless bulk of debt obligations.
So don't worry if your credit score isn't as high as you'd like it to be. There are still lenders out there who are willing to work with business owners who have bad credit. Just follow these tips and you'll be on your way to getting the retail business loan you need. And if you're looking for a fulfillment partner that can help you get your new products to market, Simpl Fulfillment is here for you. Contact us today to learn more about our services!
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