Bad Credit is not always a death knell when it comes to business banking. If there is a legitimate reason why you have poor credit some lenders can look past it. Typically, health problems, divorce, or a layoff (known as “life events”) can ruin a persons credit report through no fault of their own.
Banks look at six main criteria when judging a business loan: Credit, Capital, Collateral, Capacity, Character, and Conditions, explained further in our Commercial Financing article.
The point is that there are various criteria a lender will look at when underwriting the loan. The above criteria is NOT a checklist. Most projects are week in one area or another. Lenders reduce exposure by weighting the above criteria and making adjustments. So for example…if your project is light on collateral they will require more cash down payment. Bad credit, usually means a higher interest rate and additional collateral to secure the loan.
Most importantly…be upfront about your credit issues. If you try to hide it they will find out anyway and it will make you look dishonest. Just tell them upfront…you have a great opportunity, lots of character but you have a few spots on your credit.
Finally, the best day to start repairing your credit is TODAY! Don’t wait because your most recent credit history is the most important. If you show that the last X months were current (paid on time) then it becomes easier to overlook the old blemishes on your report.
Your Credit is Important…too important to be an unknown or ignored. Find out what your score is today at www.myfico.com, start repairing bad credit or any blemishes TODAY.