Starting a business is a risky and scary endeavor. The loans can overwhelm a business owner. Almost every business owner needs capital to start. There can be hundreds of different costs every month. Between the monthly cost of loans, stock and employee pay, taking out any types of business loans with bad credit is enough to cause financial ruin.
Small business loans for people with bad credit come with outrageous interest rates. A small business loan of $100,000 will be anywhere from 12% to 18% interest, and even higher. The monthly payment on that loan is approximately $1300. The total interest paid on the loan will be over $200,000. By contrast, a loan at low interest rates of about 7% interest will cost around $86,000 in interest over the life of a 20 year loan, and the payments would be around $800 a month. It’s crucial to be able to put money back into a growing business and the savings from avoiding business loans with bad credit will enable an owner to put more money back in the business and avoid bankruptcy because they are unable to pay off the high monthly fees. Good businesses avoid any loans with bad credit.
A good business owner will never risk his or her business on a high interest loan that would cripple their finances in the long run. The rate of bad credit business loans is the same as a credit card’s. Good business sense is not to use a credit card to finance any part of your business unless the interest rate is fixed and low. Instead of a business loan with bad credit, an owner does best to repair their credit and get a lower interest rate.
So what can you do if you have bad credit? The first step is to look into why you’re being classified as a risky borrower. Order a credit report, one that is paid for and includes your FICO score. If your FICO score is below 500 you can forget any loan. Even lenders that work with bad credit borrowers won’t loan to you. Anywhere from 500 to 620 and you can expect exceptionally high interest rates. At rates between 630 and 680 your interest rates can be quite good. Above that and banks will be fighting to give you low interest rate loans.
In order to get a higher credit score there are a couple of things you can do. Reduce the number of debts to the minimum, and increase the credit lines of the best credit lines you have. Pay all monthly debts on time. Never make late payments. Visit a reputable credit counselor for more advice on your particular credit issues.