Six Tips To Get A Loan For Business While Having Bad Credit

Business loan is available from many bank and non-banking institute to meet any financial needs. The lenders check the credit profile of a borrower. Read to know more about the tips to get a loan if you have bad credit.

1 Sep,2022 12:07 IST 24 Views
Six Tips To Get A Loan For Business While Having Bad Credit

Many a time a loan becomes critical to expand a business, particularly a small or mid-sized enterprise, or to even sustain day-to-day operations. In such cases, a business loan from a bank or a non-banking finance company can be useful. However, one of the factors that can make it difficult for a borrower to take a business loan is poor credit history.

Every bank and financial institution checks the borrower’s credit profile to assess the risk level and reduce the chances of a default. Lenders value customers with good credit scores and a strong credit history.

Securing a loan from traditional banks on low credit scores can be challenging. But there are several NBFCs and fintech startups that offer loans to individuals with bad credit. Here are a few guidelines that can help to get a business loan if you have a bad credit.

1) Understand The Eligibility Criteria:

It will be wise to do a critical analysis of the eligibility clauses before applying for a loan. For example, the cut-offs in credit score vary from lender to lender. Similarly, a loan application on a bad credit can get approved if the lender is convinced that a business is generating positive cash flow consistently.

2) Get A Co-Signer:

Applicants with poor credit scores may qualify for a loan if they get a co-signer. A co-signer is like a personal guarantor who lowers the risk for the lender. Ideally, a co-signer must have an excellent credit score and income-to-debt ratio. Banks mostly accept relatives or close business associates as co-signers.

3) Prepare A Detailed Business Plan:

While asking for funding requirements, a detailed outline stating the business goals, how to implement them and a probable financial outlook for the next few years must be prepared.

A business roadmap gives the lender an insight of how the business will generate profit to repay the loan.

4) Back The Loan With Collateral:

Another way of getting a loan is by offering a collateral like property, bonds, insurance policies, gold jewellery or any other asset of value. Lenders also accept unpaid invoices for pending payments as a source of funding. Opting for secured loans helps to lower the interest rate, too.

5) Look For Alternative Lending Options:

When bad personal credit is a barrier, applicants should look for substitutes. A merchant cash advance or an overdraft facility on a current account can be useful.

Sometimes a new loan provider offering credit on flexible eligibility criteria can be a viable option. But if possible, applicants should never hesitate negotiating with their current lender.

6) Check Out NBFCs/Fintech Lending Platforms:

Micro and small businesses experiencing financial difficulties can look for NFBCs or fintech lending startups for financial assistance. Many lenders and fintech startups follow easier norms and offer loans at a higher interest rate.


Getting business loans with bad credit can be challenging but is not impossible. Prospective borrowers can secure a loan despite having a bad credit score if they offer a collateral or bring a co-signor and guarantor on board or convince the lender of their business plans and show adequate cash flows to cover the repayments.

Disclaimer: The information contained in this post is for general information purposes only. IIFL Finance Limited (including its associates and affiliates) ("the Company") assumes no liability or responsibility for any errors or omissions in the contents of this post and under no circumstances shall the Company be liable for any damage, loss, injury or disappointment etc. suffered by any reader. All information in this post is provided "as is", with no guarantee of completeness, accuracy, timeliness or of the results etc. obtained from the use of this information, and without warranty of any kind, express or implied, including, but not limited to warranties of performance, merchantability and fitness for a particular purpose. Given the changing nature of laws, rules and regulations, there may be delays, omissions or inaccuracies in the information contained in this post. The information on this post is provided with the understanding that the Company is not herein engaged in rendering legal, accounting, tax, or other professional advice and services. As such, it should not be used as a substitute for consultation with professional accounting, tax, legal or other competent advisers. This post may contain views and opinions which are those of the authors and do not necessarily reflect the official policy or position of any other agency or organization. This post may also contain links to external websites that are not provided or maintained by or in any way affiliated with the Company and the Company does not guarantee the accuracy, relevance, timeliness, or completeness of any information on these external websites. Any/ all (Gold/ Personal/ Business) loan product specifications and information that maybe stated in this post are subject to change from time to time, readers are advised to reach out to the Company for current specifications of the said (Gold/ Personal/ Business) loan.

Most Read

Franking and Stamping: What’s the difference?
14 Aug,2017 03:45 IST
Like 3365 3365 Likes
Difference Between 24 Karat and 22 Karat Gold
8 Dec,2022 09:26 IST
Like 628 628 Likes
Personal Loan With Low CIBIL Score
21 Jun,2022 09:38 IST
Like 1058 1058 Likes
Why Gold Is Cheaper In Kerala?
14 Jan,2023 09:35 IST
Like 432 1802 Likes

Get in Touch