How to get a very low fico credit score business loan

Get a very low credit score business loan.

Business loans with very low credit scores.   Credit scores below 500 and as low as 383 are considered for a small business loan.  This low fico credit score business loan program is a good match for below 500 and sub 500 credit bureau fico scores for small business loans.

Many programs do not offer small business loans with the owner’s credit score below 500, or have limited offers.    Get up to $150,000 in business funding with credit bureau and fico scores below 400 and down to 383.   Business funding is based mostly on the revenue of the business, not the credit score.

Contact us below or first read the “Howto” section steps, direction and tips to getting low fico credit score business loan and also other business financing and then apply below.   so call us. We will be happy to discuss your situation first.  Almost all callers will find out if they have a strong chance for approval after calling in.

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How to get a very low fico credit score business loan

Step 1: Research companies that have low fico credit score business loans as main programs.   Review minimum funding amounts, rates, features and benefits and processing time from application to completion.

Step 2: Tip:  Prepare explanations or documentation for any unfavorable or incomplete information in your business profile.   This can be slow business periods or limited information on your business.

Step 3: Choose the program that most fits your very low fico credit score and overall customer profile.

Choose the program that most fits your very low fico credit score and overall customer profile
Pick the program that you think is going to be the best match for your business.

Step 4: Make contact with funding programs and confirm your business criteria meets minimum funding program requirements.

Make contact with funding programs and confirm your business criteria meets minimum funding program requirements.
Contact the lender and talk about whether your business meets the requirements.

Step 5: Submit an application for funding.  Provide documentation you have that improves your chance for an approval, higher offer amounts and better terms.   This can include financial statements, additional bank statements or tax returns.

Provide documentation that improves your chance for a higher offer
Get a higher offer by submitting documentation that shows your business to be stronger.

F.A.Q., Frequently asked Questions:

Question:  Will you really approve customers with credit scores that low?

Answer:  Yes.   Not all applicants will qualify.   Many will qualify because approval is based more on the stability of the cash flow of the business, not the credit.

Question: I have terrible credit and a very bad credit score, maybe under 400. Do I have a chance to get funding?

Answer:

You have a chance. The reasons for the low credit score will be looked at to see what is happening currently. The raw score is not the reason for any denial.

Question: My credit was hurt due to a divorce and is also severely damaged. Does that disqualify me?

Answer: Not automatically. While approval is not guaranteed and the credit will still be reviewed, this program is focused on the ability of your business to pay, not focused on credit.

Also consider other financing options.

Review funding program details below.

Too many credit inquiries pulled

I had too many credit inquiries pulled.   A broker pulled too many inquiries.
“They pulled too many inquiries and damaged my credit”.   These are some of the problems people have when their credit is pulled too many times.   It sometimes cause problem when applying for a business loan.    Business owners get turned down for a business loan for having too many inquiries.

too many credit inquiries pulled

If you need a program that will not deny you for too many credit inquiries, apply below to request offers even with a lot of inquiries.

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FAQ: Frequently asked questions, comments, or complaints:

“I had my credit pulled too many times and can’t get a loan.” A broker sent my file out a bunch of lenders and now I can’t get approved for a business loan.  What can I do?
They told me my file has been shopped and I have too many inquiries.   What kind of business loan can I get now?
“They pulled my credit too many times”

In general, your credit and credit score recovers from inquiries faster than any other type of derogatory or adverse action.    A credit inquiry may drop your score a few points for a relatively short amount of time.

Do inquiries hurt my credit?

A credit inquiry is often part of the process of applying for credit and should not be considered a negative by the applicant.  Lenders also know that applicants will have some inquiries.

How many inquiries are too many?

There is not one single answer to the question of how many inquiries are too many.   This varies on a case by case basis.    Older credit files can have more inquiries before they are impacted.  Another  difference is that some inquiries are necessary and some credit inquires you cannot avoid.

Too many credit inquiries pulled
Options if too many credit inquiries were pulled.

Other helpful actions you can take if your credit has been pulled too many times

1) Count the most recent credit inquiries.    Keep a basic idea in mind of which companies the credit inquires are from.   Make lenders aware of the credit inquiries in advance.    Some lenders will then manually review and consider the inquiries and possibly overturn any denial.
2) If some inquiries are from mortgage companies or for car loans, those may not be count against you.   Tell the lender if you have these.

3) When applying for financing, try to talk to a representative that knows the lender’s criteria and can talk to you about it.   Ask in advance if they will decline for too many inquiries within a certain amount of time.
4) Ask lenders as much about their criteria as you can.   You may be able to find out that you will very likely be declined for a business loan or personal loan.   You can decide not to apply and avoid the inquiry before it is even pulled.

Bad Credit – Fix it or wait it out?

You have bad credit.   Maybe even very damaged credit.    People all over the internet tell you to fix it, what to fix, how much to fix, and how fast to fix it.  But the question remains as to bad credit – fix it or wait it out?  Sometimes credit should be fixed, and sometimes it should not. The premise of always fixing bad credit needs to be reviewed.

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Bad Credit – Fix it or wait it out?

Cases when damaged credit should not always be fixed

Joint Accounts

You have joint accounts with someone and they are not paying them. Have a conversation with them.  Trying to fix that bad credit right away is premature.    If a Partner or Spouse was responsible for paying an account and does not, it will damage your credit if it is a Joint account.   There may have been a household verbal agreement that the Partner or Spouse was responsible. That does not matter on the credit report.   Late payments will show up for both of you.

Other questions first need to be addressed. Will you stay with your Spouse or Partner and are they communicating and working with you on the non-payment?
If you are not working together, then there is not much point to try fixing the credit right away.  Closing the Account may be the first step. If they are working with you then make a plan on whether or not it will be paid, by whom and when. Decide if you want to keep the Account open. Then later, derogatory reports can be disputed.   These issues need to be handled differently if the derogatory credit issues are with a business partner.

The bad credit is already old

Bad credit, late payments, charge-off’s, foreclosures, and other derogatory items on your credit that are already 5 years old or older are not worth the cost and effort to try to remove them.  This includes 30, 60 and 90 day late reports.   After 7 years, many items drop off automatically. For those items, it does not make sense to manually try to remove them.

Bad credit - Fix it or wait it out?
Bad Credit – Should you even try to fix it?

 

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Federal and State Tax liens

These are much harder to remove.  It is also much easier to pay them and get a statement of “released” placed on the bureau just below the item rather than trying to get Tax Liens removed. If you have a payment arrangement, keep a copy of the payment arrangement and provide it to anyone that will look at your credit report.  Tax Liens on which there is a payment arrangement are looked at far more leniently than Tax Liens that do not have a payment arrangement in place.

Looking at some of these issues can help you decide on bad credit – fix it or wait it out?

 

Business partner with bad credit

business partner with bad credit

Many business owners start businesses with partners that have bad credit. It is not hard to open the business this way.  Having a business partner with bad credit will cause challenges as the business matures.  Some of the recommendations in this article can be used by a business owner with bad credit.
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Getting a business loan

Options are more limited when applying for a business loan with a business partner that has bad credit. If the business owner with bad credit has more than a 20% ownership in the business, then most lenders will look at their credit. Some lenders will not look at credit if the ownership percentage is less that 20%. If the ownership percentage is less than 5% or 10%, more lenders will not look at the credit of those owners. If the business partner with bad credit does has closer to 50% ownership interest, then chances are much higher the request will be declined. This is especially true with more traditional lenders like banks and the SBA.

For advice in getting a business loan when you have a business partner with bad credit.

Getting a business location

Renting a location

Once a business finds a commercial location, the business owner’s credit is looked at. If the business is renting a location, the landlord will have the credit of the owners reviewed.
With damaged credit, the business may be denied for a rental request. The denial can be discussed with the landlord. If the other owner has very good credit, the landlord may make an exception based on the stronger credit.

Buying a location

If the business wants to finance the purchase of a location through a commercial mortgage, the lenders will also look at all the owner’s credit. The level of scrutiny will be higher than with a rental request.  Full financial statements will be requested. A business partner with bad credit will more likely cause a rejection in this situation than with a rental request.

Establishing business trade accounts

Almost all businesses will eventually establish trade accounts. When a trade account is requested, many companies will check the business and personal credit of the main owners. If the credit is damaged, the request may be declined. Not being able to secure important trade accounts can be very damaging to a business. This can cause the business to be short of the inventory, equipment and other services it needs to be successful.

Even if the business can secure the trade accounts it needs, the terms may be more expensive because of the business partner with bad credit. This will translate to increased costs to operate.

Obtaining Government and Private contracts

When a business bids on private or government contracts, the personal credit of the owners is reviewed. If there is a business owner with bad credit, it will be more difficult to secure these contracts. The contract request may even be denied for this reason.

Background checks

There are many reasons why a background check may be completed on the owners of a business.  Some of the reasons have already been listed. If a background check is requested, it will include a personal credit check.  Bad credit of any of the owners may be a reason for denial in a background check.

Solutions

A number of negative consequences of having a business owner with bad credit have been reviewed. If you are a business that has an owner with bad credit, all is not lost. A number of things can be done to improve, and even eliminate this problem.

Change in ownership percentage

The biggest change that can be made is lowering the percentage of ownership of the business partner with bad credit.  Those owners may not agree to this.  If they do, the ownership needs to be changed to an amount lower than 20%.  An amount less than 10% would be better. Further, an ownership percentage of less than 5% would eliminate the problem in most cases.

The solution of lowering their ownership percentage will often not be popular with many of these owners. A remedy to this is to consider other changes in the bylaws of the corporation. There are many options. The stock ownership or dividend rate can be increased. The owner can be given a higher salary.  A commission structure can be added or increased. Another option is to pay more towards their IRA. All of these actions are options to balance a reduced ownership percentage.

Change articles of incorporation

If the business partner with bad credit agrees to lowering their ownership percentage, the Articles of Incorporation should be changed to reflect this.  Many States show ownership percentage in the Articles of Incorporation.  After the Articles of Incorporation are updated to reflect the new ownership percentages, they should be submitted to the Secretary of State.

Updating the Secretary of State

The Secretary of State listing itself should be updated. The Secretary of State lists information on the company and it’s owners.  The business partner with bad credit should be removed. The owner with the stronger credit should be listed instead.

Update business credit reports

Business credit reports can be updated. This includes Dun & Bradstreet and Experian Business credit report. There is a section listing the owner’s name. This should be the owner with the stronger credit.

We receive many callers with similar requests.   Callers also call in requesting help with a “business owner with bad credit”.   Other times callers ask for help for a “business owner with damaged credit”.

If assistance is needed to prepare business plans or financial statements, the SBA Small Business Administration has excellent resources.

Credit Inquiries you cannot avoid

“Credit Inquiries” has been a topic of much conversation and concern in recent years.  The following is current information you should know about credit inquiries you cannot avoid.

Do not try to avoid virtually all credit inquiries.   A growing number of people do not want any, or virtually any credit inquiries to be pulled on them even if they are applying for credit.  They tell lenders that they want to be considered for the financing without their credit being pulled.  There are “credit inquires you cannot avoid”.
This is not feasible or realistic, especially if the request is in the name of an individual.  In most of these cases, these request are in the name of a small business and the owner wants the request to stand in the name of the business by itself without their name.
If a business has less than 35 employees, in most cases the lender requires the owner’s credit to be reviewed.
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Virtually no lenders will decide your loan request with a consumer obtained bureau.  Consumers can contact credit reporting agencies as well as outside vendors that provide bureaus and get all 3 credit reports.   These reports are not the same reports that lenders obtain.  Consumer reports are formatted differently and are simpler than the lender’s report.  The consumer version often provides more written explanation and sometimes less numerical detail.  Consumers will sometimes take these reports and tell the lenders that they want the lenders to use their consumer obtained reports rather than what the lenders use.   However, the lender’s version is usually more current than the consumer’s version.  The consumer version may be two or three weeks old.  The lender feels that the consumer’s version may not reflect items on the bureau that may have happened within those most recent two or three weeks.

There are many outside vendors that provide intermediate party credit reports.  Lenders are not, and should not be expected to know whether those vendors provide updated and satisfactory information.  Lenders are not obligated to use those reports.  As a result, consumers should not expect to avoid credit inquires by demanding that lenders use their consumer credit report version.

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Another credit downgrade coming with the debt ceiling fight?

The treasury department is currently engaging in extraordinary measures of moving money around to meet the government’s commitments.  Congressional Republicans are finalizing a list of requirements they will demand that the administration meets in order to ensure their cooperation.   However, bond rating agencies have already stated that another round of fights may trigger another credit downgrade of U.S. Treasuries.   Is another credit downgrade coming with the upcoming debt ceiling fight?

Counter arguments have been made by some U.S. politicians that not increasing the debt limit will not be as dire as predicted because Congress could authorize payment of principal and interest on existing U.S. debt, while not paying other obligations in other areas.   However, bond rating agencies such as Fitch has indicated that such a ploy may basically be considered a thinly veiled default and may well still trigger a review of the Government’s credit rating.   Their view is that this is nothing more than debt prioritization, which pays certain obligations but not others, and is just another term for default.

Politicians have already shown that they are apparantly willing to use the debt ceiling to score perceived short term political points on an issue that will be forgotten in a few weeks at the expense of the nation’s credit, rather than compromise, or at least make it a priority not to fight on such a critical issue.   The nation’s credit deserves far better than this from both parties.  It appears that the extreme wings in both parties are driving the debate to a head.

Another major danger in this type of fighting is that the debt limit has to be increased every few months, or roughly every year at the longest because it is only increased by a relatively small percentage on each occasion.  If the branches of Government would agree on a plan to raise the debt ceiling ongoing by an agreed set of circumstances, these credit downgrade threats would largely go away.

Business Lines of Credit – The most difficult business loan

Business lines of credit

As part of their decision making process for obtaining a business loan, business owners should also consider which type of loan will be the most difficult to qualify for, and which will be the easiest to qualify for.

In most cases, business owners carefully consider the terms, including interest rates, number of months, total amount of the repay, and early payoff considerations.   Not often enough do business owners consider whether or not they will qualify, and other detailed conditions of the loan.  If a business loan has good basic terms, but is very difficult to qualify for, then the fact that it has advantageous terms may not be very relevant.
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Some lenders can place one or two conditions on a line of credit which can completely negate all of the other advantages of the financing.  For instance, for some lines of credit, the lender may come in at the last moment and require the borrower to put up residential real estate, or even their primary residence as collateral.  When the lender does this, the borrower should be savy enough to see that this is worse than if they had taken out a home equity line of credit because even on a home equity line of credit, only the house is taken as collateral.

If the lender is asking for the applicants primary residence on top of a business line of credit, and the borrower agrees, then they are agreeing to doing a home equity line of credit and offering to give the bank many of their business assets as collateral as well.   Unless the borrower really needs that financing that is being offered, borrowers would be advised to look for other financing, or attempt to negotiate the terms of the approval with the lender.

Advantage of leases on personal credit

Leases have long been a popular financial instrument.   Leases are often reported differently than regular loans.   Depending upon the lessee, the reporting differences may be an advantage or a disadvantage.

In many cases, leases are not reported on personal credit, especially business leases.  In a business lease, the lease is not reported on the signer’s personal credit.   For more established businesses and individuals with a longer, more established credit history, the fact that the lease is not reported is considered an advantage because it will not be counted as an additional debit to the individual.   Conversely, if the lease were reported, it would be considered a disadvantage.

 

In the case of newer businesses, younger individuals or individuals with limited credit, the fact that the lease is not reported on individual credit could be considered a disadvantage.  In these situations, the lessee may want to build up positive business credit and personal credit and a new significant reporting would be an advantage.    For any business that is less than 3 to 5 years old, a lease reporting will help the business credit since the business is building up credit.

Many of the business credit agencies will report the lease or show the lease under one of their industry trade account listings.    D & B, Experian Business credit report and Paynet will typically report the trade reference.    The lessee can take the lease number, lender name and lease approved amount, contact the business credit reporting agencies and check if they are being reported.   If not, the lessee can provide the information to the business reporting agency and get it listed.   Some of the business credit agencies may not have an account or file for the lessee’s business.  In that case, the lessee needs to decide if they want to establish a file.   The business credit reporting agencies may charge a significant fee to get a business credit profile established.

 

If that occurs, the lessee needs to have as many business trade accounts ready as possible. The lessee should have a list ready with existing trade reference company name and account numbers.

Can a strong Co-signer make up for a bad credit primary signer?

There is a long history in credit of using a strong Co-signer to strengthen an application. However, can a strong Co-signer make up for a bad credit primary applicant?

What is a Co-Signer?

A Co-signer is someone that signs with you on a loan request.  It is normally done when someone with stronger and better credit than you offers to sign to help you secure financing.    A co-signer is jointly liable for what they are signing for.

In general, a strong Co-signer does not make up for a bad credit primary applicant.   If the primary applicant has significant derogatory information, especially significant recent derogatory information, a strong Co-signer will in most cases not be able to help turn a decline into an approval.   A strong Co-signer does have a positive effect on an application is situations when the primary applicant is not strong enough, or has limited or weak credit, or has minor derogatory credit.
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There are several reasons why a strong Co-signer is often not helpful when the primary signer has significant derogatory credit.   Lenders know that in most cases, Co-signers sign solely to help the primary applicant get the loan.   A Co-signer normally does not intend to take a benefit by Co-signing.    Examples are parents that Co-sign for their children to help them get a car loan.   However, there are many other examples.    Sometimes another relative may Co-sign, or a friend may Co-sign just to help the primary person get the loan.    In such instances the secondary signer does not want the proceeds or asset that is being applied for.    Due to this, if the primary applicant runs into difficulty and cannot repay, the Co-signer often be very unhappy about the prospect of paying the loan because they received no benefit from it.    In the past, lenders have heard Co-signers outright tell them that they just signed the papework to help the primary person get the loan.   In some cases, the C0-signer really believes that they really will not be responsible and that the limit of their role is that the just signed the paperwork and there was nothing more to it that that.

Another main reason that lenders do not want to make loans to bad credit primary signers even with a strong Co-signer is that if the primary has a lot of recent derogatory credit, the lenders know that statistically, there is a much higher chance that the primary applicant will go into arrears and past due compared to primary applicants with limited derogatory credit and a high credit score.   Since the percentage of borrowers that go past due is higher, lenders know that they will end up going to the Co-signers asking for recourse in a higher percentage of instances than with stronger credit primary signers.

There are some loan products which are exceptions to this, but in most cases for the reasons stated above, a strong Co-signer will not help a derogatory credit primary applicant get approved for a loan that they otherwise would have been declined for.

How a Government Credit downgrade affects services

There is currently little awareness, or interest,  if and how a Government credit downgrade affects all services that the Government can provide.

In both the short and long term, a Government credit downgrade has a significant affect on the services Government can offer to society, mainly in a reduction of those services.    One need only look at Greece to see the nightmarish affects of many downgrades in credit, to the point where Government issued bonds going into junk status.

When the Government suffers a down grade in it’s credit rating,  it may be foreced to offer a higher rate of interest on the securities it issues to attract capital investors.   Currently, the Government pays approximately 12% of the revenues it takes in to investors through the Government Treasury bonds it has issued.    This means that the Government is now using approximately $300 billion per year to pay interest owed.   The public receives no benefit from this money.   It is, in essence, completely wasted money.  If there is another credit downgrade, or several downgrades, it may force the Government to pay a higher rate of interest on the same Treasury bonds to attract the same investors.

If an extra 1% in interest is paid, this is very significant because it is likely to be a permanent increase rather than a temporary or fluctuating  increase.    In order for the interest payment on bonds to go down, the credit rating issued by Moody’s and Standard and Poor’s would have to be upgraded.    Considering the Government’s large and consistent budget deficits, this scenario is unlikely, especially in the short term.    The extra 1% paid in  interest will represent approximately $10 billion dollars per year, each year, ongoing for those Treasuries issue in that 1 year.   If this is done each year, with a budget deficit of $1 trillion, this is approximately and extra $10 billion every year, on top of the previous year’s trillion.

So how does this affect or decrease services?

This is money that the Government cannot now use, that is previously did use, to fund any services or benefits, including Medicare, Social Security, Education, Military, Highway, unemployment, job training, or any other areas of the budget.   Every year that the Government says it has to reduce the benefits to Medicare and Social Security because of limited funds, those funds that are now being paid in interest could have been used to fund these programs, rather than cut them.    A future post will focus specifically on the dollar amounts per year.