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Don’t Let Bad Credit or Insufficient Collateral Keep You from Getting a Business Loan

May 9, 2017

You may have come up with a great product or service, and may even have a perfect business plan in mind. However, if your credit rating is less than excellent, you’ll probably have a difficult time getting a loan to achieve your dreams. And if it’s an unsecured loan that you’re after, your chances of success are likely to be even slimmer.

Most financial institutions impose strict lending standards when it comes to unsecured loans, and personal FICO scores of 640 or less are generally looked upon as a bad credit risk. So does this mean that if your score is not good enough, you’ll never be able to secure the financing that you need?

Not really. There are ways in which you can get an unsecured loan even if your credit score isn’t quite up to the mark. Here are five.

Get a Business Partner

If your business plan has good potential, you may be able to attract a business partner with good credit – someone who is willing to apply for (or co-sign) an unsecured loan with which you can start your small business or provide a leg up to your organization. However, before getting into such a partnership, you should work out the finer details. For example, discuss beforehand whether your partner would want to be involved in the process of running the business, or would he or she would be content to leave it entirely to you.

P2P Lending

Also known as peer-to-peer financing, this method involves taking an unsecured loan from other individuals rather than a financial institution. Lending platforms such as Funding Circle and Prosper Marketplace first ascertain your authenticity and then allow you to connect with potential lenders through their website. Loan eligibility and interest rates are based on a variety of factors other than credit scores, such as the educational background and business experience of the borrower. 

Revenue Based Financing

This kind of financing is ideal for businesses that generate positive cash flow but are unable to get bank loans due to poor credit ratings or insufficient collateral. In this case, to acquire immediate funds, business owners sell a portion of their future revenues to investors. Apart from the principal, repayment terms may include as much as 1.5 to 2.5 times the principal loan amount.

Family and Friends

In certain cases, if you’re not able to raise money for your business through the conventional route, family or friends may be willing to lend a helping hand. However, be prepared that you may have to concede some control of your business for this purpose, as they may want to be involved in the management of the venture. Before entering into such an agreement, make sure that your business generates enough cash flow to enable you to pay off the loan as per the pre-decided terms, else you may end up upsetting precious relationships.

Improve Your Eligibility

If you have bad credit, perhaps the best method in which you can get an unsecured loan is by increasing your own creditworthiness. Request a copy of your credit report, evaluate the factors that are pulling your score down (such as hard inquiries, late payments, and credit usage), and then take concrete steps towards improving the same. (To know more about what goes into your credit score, and how you can improve it, click here and here). If you find that the task of improving your own credit is too overwhelming, you may even consider engaging the services of a credit repair company for the purpose. Once your credit is in good standing, you’ll not only have access to plenty of loan programs, but you’ll even manage to get the funding that you need at extremely competitive rates! At our organization itself, we offer individuals with good credit an easy way to get as much as $250,000 or more of unsecured credit at 0% interest rate. For a small fee, our team at Fund&Grow helps our clients get the funding they need and manages every step of the process. So if you require a loan at competitive rates, call us at (800) 996-0270, and we’ll do our best to help you get what you need.


Ari Page Ari Page is the CEO of Fund&Grow. He resides in Spring Hill, Florida with his wife and two children.

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