Obtaining financing with bad credit

If you have bad credit you are considered a high risk to, lenders so many banks or other traditional lenders will not want to take a chance on loaning you money, even if it's for a business. In getting a business loan, many lenders are going to look at your personal credit score to determine if they are going to grant you credit.

Luckily, you can still get financing for your business even with bad credit. The process that you are going to have to go through is going to be more difficult. As long as you know a few tips to follow, getting financing for your business with bad credit can be done. Here are some tips that you will need to follow.

Tip one:
You will need to separate your personal credit from your business credit. If your personal credit is bad then you do not want to have it tied into your business credit because you will never be able to get financing. To separate the two you are going to have to obtain a Tax ID number so that you can being building your business credit score. You will want to start small and build your credit up slowly. Once you have a credit history for your business you can obtain better financing with lenders and secure larger loans, but do not over extend yourself.

Tip two:
While you are building your business's credit, you should also focus on repairing your personal credit. Even though you might still have some bad items, many lenders will look at your recent payment history along with your credit score to determine if you are eligible for a loan. You will want to make sure that everything is paid off and that all of your payments are on time. This can increase your credit score as well as get you approved for a small loan.

Tip three:
Check your personal credit reports for any errors. By taking advantage of the free annual credit report, you can look at your personal credit score once a year to make sure that everything is being reportedly accurately. Sometimes errors are made and that can affect our credit scores. If you disagree with anything on your credit reports be sure that you appeal to the credit reporting agency who will then contact the creditor to find out if it is accurate or not. If you have supporting documentation to support the errors such as a letter that it was paid off, you can give the credit companies a copy of that letter.

Tip four:
Consider putting down some assets as collateral. Most lenders do not want to take a risk when they are lending money so if you have a title to a car that you can use for collateral you might be able to get some financing. This can also limit how much money you can borrow. Generally, lenders are only going to loan you as much money as the assets is worth. This way if you default on the loan they can take your asset and sell it to get their money back.

Tip five:
Consider using some non-traditional ways to get financing. Non-traditional ways give you more options for obtaining financing then going to a traditional lender. Some ways you might consider is selling assets to make some money or even consider using trade credit to obtain what your business needs.

Obtaining financing for your business with bad credit is going to be a costly process. You will be faced with high interest rates, but you might also be forced to use asset based lending. This can mean putting your house down as collateral, depending on the financing you need.