Startup entrepreneurs with less than perfect credit often have a misconstrued idea of what type of business financing they can qualify for once they have damaged their credit history. I have worked with numerous entrepreneurs who believe all hope is lost and there is no way they will ever qualify for small business financing. That is simply not the case. Although having damaged credit can increase the amount of time it takes to secure small business financing, it is not impossible. Here are 4 tips you can follow to obtain a small business loan while you work on improving your personal credit history.
- Develop a business plan – Developing a full business plan with marketing plan and at least 3 to 5 years of realistic financial projections will enable you to apply for alternative financing such as microloans. Microloan lenders often require you to submit a full business plan, along with your last 2 years of tax returns and other documentation such as bank statements and/or W-2’s. These lenders have less stringent credit criteria you have to meet to get approved, therefore people with less than perfect credit can often qualify. You can sometimes have bankruptcies and foreclosures and still get approved for up to $50k in microloans. The business plan will help you get approved so if you are serious about getting a small business loan, you’ll begin working on one right away. Companies like QT Business Solutions who specialize in writing and developing business plans and assisting small business owners secure microloans can help you get started.
- Start Credit Restoration – If you have damaged credit, I strongly suggest that you being working on correcting the issues affecting your credit. This can include paying off old debts and negotiating removal of old derogatory and delinquent accounts. Many people believe that paying off the debt will not help improve their credit scores, but that couldn’t be further from the truth. It gives you the chance to start a new beginning. Starting over is one of the keys to being able to qualify for small business loans when you have damaged credit. I suggest teaming up with a credit restoration expert who is experienced in helping people get accounts removed using the “pay for delete” method. This method includes arranging payment with your creditors if they agree to stop reporting the negative account. Some creditors try to shy away from this but remind them that there is no law saying they have to report the account to your credit history in the first place. If they say there’s no law that they have to remove it from your credit report, tell them that if they don’t, there is absolutely no incentive for you to pay it since it hinders you from getting a small business loan. Again, it’s good to connect with an expert credit restoration specialist to assist you with this process to be sure it’s done right. Our experts here at Hawkeye Management, can help you with this – contact us for details.
- Make Timely Payments – Did you know that 35% of your personal credit score is calculated based on your payment history, collection accounts, and public records. You can avoid having collections and public records show up on your credit report by making timely payments. I realize that making timely payments is dependent upon your financial situation – and this is the reason I am giving you my next tip.
- Stay Employed – Most lenders (especially microloan lenders), require that you be employed for at least 6 months when you apply for a small business loan. Lenders need to know that you are capable of paying back whatever you borrow therefore it’s pertinent that you are employed continuously before and after you apply. Staying (gainfully) employed will enable you to make timely payments towards the small business loan and enable you to pay off old debts (and continue to pay current debts on time).
Following these 4 tips will enable you to obtain a small business loan even with your damaged credit history. If you are ready to start restoring and rebuilding your credit history so you can qualify for a small business loan, please feel free to contact one of our advisors today. Also, contact a rep at QT Business Solutions for information on how you can obtain a microloan up to $50k with less than perfect credit.