At Loanability, many of the merchants we speak to come to us because they’ve had trouble obtaining more traditional guaranteed business loans. Bad credit, insufficient collateral, and even just the industry type of the business are all reasons that a merchant might have been turned down for a loan, so they come to us instead to see if we can offer an alternative. Being declined for traditional loans often comes as a surprise to business owners, but it’s more common than you might think. A 2014 study found that just 39% of the smallest businesses who sought out loans were successful in obtaining them.
The most perplexing part of this for a small business owner can be that there’s often no clear reason why they’re declined for a guaranteed business loan. Lenders often look at what’s called “quality of earnings” to determine whether a business qualifies. Of small businesses that were declined for loans in 2013, 29% were declined because of their quality of earnings. If a small business has inconsistent sales, they’re often immediately disqualified–never mind that it’s hardly surprising for a small business to have inconsistent sales.
Of course, one of the main reasons an owner can be declined is simply that the owner has bad credit. Small businesses rarely have much that they can afford to put up as collateral, so the owner’s credit plays a significant role in determining whether they can qualify for a guaranteed business loan. Getting a small business loan with bad credit can be nearly impossible, regardless of how successful the business might be otherwise.
So can you get a small business loan with bad credit? With a traditional lender, the answer might be no. At Loanability, however, we’re more interested in the strength of the business than the strength of the owner’s credit. With us, there’s no minimum credit score–we look at the whole picture and try to find a program to fit every merchant that comes to us for funding. If you have poor credit, that won’t disqualify you from our funding options.
When less than 40% of small businesses are able to find a loan for their business, there’s clearly a problem. Every business wants to grow, but less than half of them say they have the financial resources to do so, and when they try to obtain those resources through traditional lenders, they’re too often turned down. At Loanability, we’re looking to change that. We know that small business owners won’t always have perfect credit, and that most merchants are more worried about their day-to-day operations than their “quality of earnings”. If you’re having trouble getting a guaranteed business loan, give us a call; no matter what your situation, we’ll work to find a program that fits your needs.