How to Obtain Small Business Loans for Women With Bad Credit

Save

It can be very difficult for a woman to get a small business loan with bad credit. If your personal credit history is littered with collections, judgements and payments that are 30, 60 or 90 days past due, it will be an uphill battle to obtain a loan. To do so, you will need to concentrate on the two of the "three C's." Your credit is already bad, but if you have the capacity and collateral, you will have a better chance of obtaining your small business loan.

  • Research banks to find one that is suitable for your needs. There are banks that will help a woman obtain a small business loan even with bad credit. Be cautious, however, as they may charge you inordinately high interest rates and large fees to cover their potential future losses. Try to find financial institutions with special financing for women and minority-owned businesses. They tend to have different criteria to help women and minorities obtain small business loans by relaxing loan-to-value and debt-to-income ratios.

  • Write a detailed explanation of your credit history. Credit reports only show what you have paid on time and what you haven't. They do not list the circumstances that led to your problems. If your bad credit is from a time when medical issues put you out of work, that is more forgivable than simply overspending and not paying your bills.

  • Demonstrate the capacity to repay the loan. Your credit may have been shoddy on a personal level, but if your business is doing well and you can show that you provide adequate debt service coverage, you have a good chance at getting approved. A good debt-service coverage ratio is usually around 1.20:1. This means that you take in one dollar and twenty cents in income for every one dollar in expenses. The higher the ratio, the better your outlook.

  • Give the bank adequate collateral. The more liquid the collateral (i.e., the more easily converted to cash), the better. If you can secure the loan with cash, a certificate of deposit or funds in a savings account, the bank may not even run a credit check. However, cash-secured loans are rare, so you will likely offer real estate, business assets or equipment. There are different standards for loan-to-value ratio, depending on the type of collateral. For example, a vehicle, unlike a house, depreciates in value each year. Therefore, the bank may only lend up to 60 or 70 percent of its value, whereas they may go to 80 percent for a home.

Related Searches

References

  • Photo Credit business woman image by Mat Hayward from Fotolia.com
Promoted By Zergnet

Comments

You May Also Like

  • Grants to Start a Childcare Business

    Grants to start a child care business are available from a wide range of sources, including private and public funding. Although child...

  • Farm Grants for Women

    According to the U.S. Department of Agriculture (USDA), the number of women-owned farms in America has steadily increased since 1978. The federal...

  • Grants & Loans for Minority Women

    Grants and low-interest loans are set aside for minority women by the federal government as well as public and private business institutions....

  • How to Get Business Loans for Women

    Women are said to start businesses at twice the rate of men. However, women may find it difficult at first to gain...

  • How to Get Bad Credit Small Business Loans

    Bad credit small business Loans are available; most people simply do not know how to obtain them. You will hear a lot...

  • Start-Up Business Loans for Women

    Don't despair if you are a woman with a start-up business experiencing difficulty obtaining financing. Several unconventional loan programs target new businesses...

Related Searches

Check It Out

Are You Really Getting A Deal From Discount Stores?

M
Is DIY in your DNA? Become part of our maker community.
Submit Your Work!