We have all heard the phrase "if it sounds to good to be true..." And we all know how it ends. When it comes to bad credit business loans this phrase holds especially true. One of the top challenges for small business owners and entrepreneurs is getting the funds to start their businesses.
The Truth About Advertised Bad Credit Loan Rates
Millions of people have bad credit and it is a particularly hard thing to deal with for small business owners who are trying to obtain a loan. There are numerous companies that may claim that they can get anyone a loan for hundreds of thousands of dollars, in spite of their bad credit. But this is just not true. It is important to realized that unsecured loan providers are legally allowed to advertise their best rates. However, there is a catch. They are legally allowed to advertise these rates as long as a minimum of two-thirds of their loan applicants will get the rate. So while there is a pretty big chance that you may get the rate, there is also a fairly big change--30% to be exact--that you will not.
There Is Generally No Escaping Higher Interest Rates
In any case, the fact is that lenders consider applicants with bad credit high risk. Therefore, whether you get a secured or unsecured loan your interest rates will be much higher. In addition to this, there may be some form of additional security that must be attached to the loan.
3 Options For Business Owners With Bad Credit
The best option for small business owners with bad credit is to take the time to establish credit under their business name. Now, keep in mind that this takes a few years but there are some things that you can do in the short-term to get things rolling. The advantage of doing this is that there is no connection to your personal credit, so when you apply for a loan in the future under your business name your personal credit will not be checked. In the meantime you should get a business checking account, business credit card, and phone line in the business name. Make sure to ask the phone company and the credit card company if they report their accounts to the credit bureaus. If they do not, ask them if they can do so for your account--if they cannot, then you should search for companies that will.
Getting a bad credit business loan is one of the only options for many small business owners and entrepreneurs with bad credit. So, if you must get a bad credit business loan you should at least know the best way to go about it. First, consult with many different companies about all of the different options they have. Second, realize that while you will have to pay higher interest that secured personal loans typically have lower interest rates than unsecured loans. Also, keep in mind that you can always try negotiating with the lender--it never hurts to try.
Lastly, ask a friend or relative for help. This is not an option for everyone. But for those who may be able to obtain funds in this way, remember to be absolutely honest with your friends and relatives and to explain all of the risks associated with their investment.
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