For most women, getting a small business loan can be very hard, especially if she has a bad credit history. If your records show numerous judgments, collections and payments that are at least 30 days past the due date, it will be a rocky road towards that loan's approval. In order to get one approved, you'll need to give more attention on two of the "three C's", namely your capacity and collateral. Even if you have a bad credit, with these two, you're going to have a better of getting that small business loan.
What To Do's:
1. Look and do some research and find a bank that suits your needs. Truth is, there are still banks that are willing to help a woman get a business loan despite having bad credits. You may, however, need to be careful because some banks may offer you assistance, but charge you with higher interest rates and confusing fees to cover potential losses in the future. As much as possible, look for financial institutions that offers specific financing for women and small businesses. These types of institutions have different criteria to help women and small business owners get business loans by relaxing debt-to-income and loan-to-value ratios.
2. Explain your credit history in details and in paper. Only the information of what has been paid on time and what haven't been I showed in the credit records, and unfortunately they don't put to list the circumstances that caused or led to your problems. If a bad credit history in your record is due to a recent medical emergency that is more likely to be considered, rather than when it's caused by overspending and or simply not paying your bills you haven't considered it a priority.
3. As much as possible, demonstrate and show them your capacity to repay the loan. On a personal level, your credit may be a bit shady, but if your business or stream of income is doing well and you are capable of providing adequate debt service coverage, your chances of getting approval is definitely within reach. A good debt-service coverage ratio falls around 1.20:1, meaning that you take in a dollar and twenty cents income for every one dollar spent. And, the higher the ratio is, the better your outlook.
4. Give the bank enough collateral. The more liquid (or how easily it can be converted to cash) the collateral, the better. If you can pay the loan with cash, or if they see that you have more than enough funds in your bank account account, the bank may not run a credit check anymore. However, cash-secured loans are very rare, so you will be more likely offer business assets, properties, real estates or equipment as collateral. A loan-to-value ratio has different standards depending on the type of collateral. For instance, unlike a house, a vehicle depreciates in value each year. Therefore, banks may only lend you 60 or 70 percent of its value, whereas for a home, they may go higher up to 80 percent.
CN Ferrel is both a writer, a freelance photographer, and an occasional loan consultant. Now currently working as a blogger for several sites related to online loan resources and loans for women.
