How to Get a Commercial Loan Despite a Bad Credit Rating
If you have a bad credit score, getting a loan for your business might be more difficult, but it certainly isn't impossible.
Banks take various factors into account when assessing your application for a business loan . They try to understand the needs of your business, the project targeted by the request, the current financial situation of your business, as well as your credit rating and your personal net worth.
"The financial condition of a business is the most important factor in our assessment when deciding whether to approve a loan or not," said Darryl Curtis, director of the BDC business center in Meadowvale, Ontario. “It's a matter of judgment. "If a business is strong, growing, and has a good long-term outlook, the owner could get a loan even if their personal credit rating is poor."
Here are some tips from Curtis on getting a business loan when your credit rating is bad.
1. Be transparent
If your credit rating is bad, don't try to hide it from your bank. Instead, explain your situation to your banker. "We will not refuse your request just for a bad credit rating," says Curtis. "There could be a valid reason. We always check what is behind the numbers. ”
2. Be willing to pay interests higher
The interest rate on your loan is determined by the risk you present according to the banker's assessment. You will pay more if he considers you to be at higher risk.
"Even if your business has good prospects, you will probably have to pay higher interest if your credit rating is poor," says Curtis.
3. Be patient
Banks use credit scores to speed up the credit rating of a borrower. A bad credit rating slows down the loan process because your company's financial documents need to be examined in more detail and additional approvals are usually required.
"Using credit ratings speeds up the loan process," says Curtis. “They allow the lender to respond more effectively to customers. Instead of taking four or five weeks, we can do it in a few days, but a bad rating makes it difficult and can slow the process down. ”
4. Apply to improve your credit rating
You can improve your credit rating in several ways. For example, Curtis advises entrepreneurs to limit the number of credit cards they use and not use one card to pay the balance of another. He also mentions the importance of paying your bills on time to build a solid credit history.
The credit score is not the only factor: it is a model and an indicator .
These methods are described in this article, where you will also find tips for improving your credit rating in order to get the loan you want in the future.
Above all, according to Curtis, it is important to remember that the credit rating is only one of the multiple tools used by banks to assess commercial loan applications.
“The credit score is not the only factor: it is a model and an indicator. While we don't want to make too many loans below a certain threshold, we do it for good clients when the decision is justified. ”
For more information, download your free copy of the How to Obtain a Commercial Loan eBook : A Guide to Preparing a Compelling Loan Application .
posted by Ashish @ February 06, 2020
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