Poor Credit or Making a Loss? Ways to get a Business Loan

One assumption that can be increasingly challenged is the notion that it is impossible to get a business loan if the bank has rejected an application.  So widespread is this assumption that many businesses don’t even approach their bank, let alone look elsewhere.  With new options that have entered the marketplace, it can be possible to get a business loan, even if there is bad credit, or the business is not making a profit.

Profit is not necessarily the main driver

The new breed of alternative lenders are willing to consider lending based on a different set of criteria to the banks.  For instance, some business lending is provided based to a significant extent on the strength of Directors Personal Guarantees. This is done in the form of a credit scoring system, with the underlying factor being whether Directors have significant equity position in different types of property.

Remarkably, unsecured business loans with strong Personal Guarantees can be found, and provided without any form of legal charge being taken against any Directors’ properties. Therefore it is possible for businesses to find a way to an injection of capital, where previously this might not have been possible.

Adverse Credit Cases can also be funded

Business with some form of credit issues have always struggled to get funded, but in some cases even these forms can get access to capital injections.  Currently a legal charge is needed against forms of property in order to lend, but as a result the rates tend to be somewhat lower.  (N.B. this is not an equity release, this is a loan borrowed by the business).  It is therefore possible to qualify for a business loan if Directors own some form of property with equity in it, and as a result credit score well.

The issue of Personal Guarantees (PGs)

Personal Guarantees for a business loan can be a thorny issue for Directors.  The concept takes minds away from a business decision to one that feels more emotional.  Whilst many Directors believe the business should stand on its own, from a lender’s point of view this argument doesn’t hold weight.  This is because Directors can quite easily get away without paying back finance by shutting down a limited company and starting back up as second company.  Without a PG, lenders have pretty much no legal recourse.  Most lenders now require PGs, which essentially act as an incentive, or a deterrent, to stop the devious few who may have no intention of paying back funding from the start.

The reality is PGs rank as a last resort behind the business’ ability to repay in default situation.   It is a poorly understood concept that is worth delving into in a bit of detail.  A more comprehensive article on Personal Guarantees can be read by clicking here.

A changing landscape

The business lending landscape continues to change, with new options coming out all the time. The challenge for business owners is how to stay on top of these developments, and how to compare what they can get in a timely fashion.   There are some excellent places you can go to get this sort of information, when your business most needs it.

To find out if your business can qualify for today’s funding, click here..


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