Convincing a bank to extend a loan to your small business is never easy, even if you have a great credit history. Banks don’t like risks, and they like to make money. Small businesses are a risk, because they don’t have the same bail-out options as a big business does.
But when you’re a small business owner without a personal credit rating in the 700+ zone – you’re probably going to really have to struggle to get to get a bank loan (and that especially includes Small Business Administration backed loans, which are notoriously difficult to qualify for unless your credit history is pristine).
If your personal credit is low (under 600), you have to find other ways to convince funders to take a risk on you. But you still have options ranging from building/repairing your credit to microloans and alternative funding. Read on to find the strategies that will work best for you.
1: Apply for a DUNS number:
Having a DUNS number allows you to establish a business credit history and access your business credit report from Dun & Bradstreet. And when you have a DUNS number, you can apply for small business grants listed on Grants.gov, a database of federally sponsored grants. And you can register to do business with the U.S. government through its System Award Management website, and then create an account at Grants.gov.
2: Network and learn:
The Small Business Administration (SBA) offers workshops and networking events that can educate you on business best practices and open the doors to new opportunities. Look too at you’re your local chamber of commerce offers, as well as Google for other networking and training opportunities near you.
3: Get a mentor:
You can meet with experienced business mentors at SCORE for help in understanding funding options and how to get approved for bank loans and other funding options.
4: Talk to a credit counselor:
If your credit score is below 500, you may want to talk to a pro about how to go about repairing it. Skip the companies that offer to magically repair your bad credit. Review the Federal Trade Commission’s advice on choosing a trustworthy credit counselor.
5: Be realistic:
If your credit score is low, you’re going to pay more in fees and interest rates than you would otherwise. You could hold off for a year or two and work hard to improve your credit score before you actually apply for a loan. If you don’t immediately need funding, this is a good option to consider. If you do need funding ASAP, look at option 6 and – especially - option #7 below.
6: Apply for a microloan:
This is a small-sum, short-term loan aimed at helping small businesses obtain funding. Loans from about $1000- $50,000. You will need to have a solid business plan, a decent personal credit history and collateral to qualify for a microloan. If you meet the requirements, this is a great option for the smallest of businesses (less than five employees, typically.) Microloans can also help self-employed people to access funding for equipment and other business needs. A good place to start looking for microloans is the SBA.
7: Explore alternative options:
This is almost certainly your best bet to meet an immediate funding need, and will always be the fastest and least challenging way to access funding. Alternative funders are happy to work with businesses that have been open for three months or more and have revenues as low as $5000 a month, and funds are typically available within 72 hours. Business owners don’t need to have perfect credit scores to qualify for funding. Alternative funders are less interested in credit history than they are in assessing your ability to pay now. This is typically determined by your business’ revenues.
One easy way to get started with alternative lenders is by getting pre-approved by One Park Financial, which then gives you access to a funding expert who can discuss your business needs and options to determine what funding types best meet your needs.
One Park Financial works to help owners of small and mid-sized women-owned businesses access the funding that meets their needs. Established in 2010 and founded by entrepreneurs, One Park Financial understands the challenges associated with small business loans. Visit oneparkfinancial.com or call 855.218.8819 and connect with a funding expert today to discover the options that make sense for you and your business.