When it comes to funding a small business, traditional lenders look at a few different sources to determine whether or not they will lend you money, and whether or not they will lend you enough money to even make applying for a loan worth your while. These deciding sources most often include years in the business, annual revenues, collateral, and most importantly your credit score. In fact, for traditional banks, your credit score often remains the most important factor in determining whether or not you will get a loan. So, what do you do if you’re a smart business owner with poor credit?
Unsecured Bad Credit Business Loans
The fact of the matter is if your credit score is less than 640, you probably won’t get a traditional loan at all, and with a credit score of 640, you aren’t entitled to a great interest rate. That leaves the option of alternative financing options like bad credit business loans, unsecured business loans, peer to peer lending, credit cards, and other fine options.
While these options are available to you, the interest rates you get will still sometimes depend on the type of credit history you have. In this event, business owners with bad credit will often look to team up with a business partner or investor with good credit to help them secure new loans, and get a better deal, more funding, and a better interest rate.
Attracting a Good Credit Business Partner
In this situation, the question remains, “How do I attract a new business partner with good credit when I have bad credit?” Here are some selling features.
1. Show them your dedication to fixing the credit problem
It’s true that it may make your sought out partner’s stomach turn when they find out your credit is poor, and you have to rely on them in order to get financing. Here are some things you can do to show them you’re working on it:
- Monitor your credit report, know what’s on it, and make a plan to fix it
- Arrange automatic payments on other loans from a bank account with some money saved
- Get a credit card and pay bills on time
- Consolidate any overwhelming debt.
- Get rid of any credit you don’t need
- Don’t let any disputes go to collections; resolve them immediately.
This type of responsibility will show your business partner you are serious about fixing your credit, and that you are reliable in the future.
2. Have a great business plan
If you have a great business idea backed up with a great business plan, often the opportunity will speak for itself and they will be willing to take the risk.
3. Offer them a big piece of the pie
If you are relying on their credit to get your small business loan, then there has to be something big in it for your business partner. Come to legal agreements beforehand on what percentage of the business you own, and what percentage of the business they own. You will 100% want to talk to both an accountant and a lawyer to avoid any messiness in the future.
These are 3 surefire ways to attract a business partner with good credit. When they understand you are serious about fixing your credit and paying your bills, have a good plan, and are offering a true partnership, they are more likely willing to invest and let you rely on their credit to secure additional loans.