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- Mr BizPlan Says (44)
- December 31, 2008: It Was The Best Of Times, It Was The Worst Of Times
- December 24, 2008: A 2008 Christmas Poem
- November 23, 2008: The Next Great Depression...In High Definition
- October 7, 2008: How the Credit Crisis Affects Small Business
- September 26, 2008: Is Your Brand Awesome? Should it be?
- September 17, 2008: What's going on? From Wall Street to Main Street.
- September 2, 2008: The Universe of Opportunities
- August 7, 2008: Rags to Riches...Anecdotally Speaking
- June 30, 2008: Building Quality Financial Projections
- June 16, 2008: "The Only Thing We Have To Fear..."
How do I get financing with bad credit?
java girl asks:
I have a great opportunity right now to take m y business to the next level. I recently moved to a “sleeper community” in other words there is a lot of stuff coming and happening in the near future. If I could get together the $ to get started I would be in a great position to dominate the market NOW before the boom starts!
My personal credit has taken a beating over the years as my husband has had some serious health issues. If I can get this going it could change all that pretty quickly but getting start up cash is difficult. Any suggestions or advice would be appreciated!
Mr BizPlan Answers:
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, start repairing bad credit or any blemishes TODAY, and monitor your credit with a monthly credit watch service.
Good Luck
Mr BizPlan