Bad Credit Loan

By: Daniel Spivey

People with bad credit or poor credit history can be get loans from traditional banks. This is because banks are a lot more conventional with their investments and unlike many venture capitalists; they are far more likely to approve loans for people with bad credit. This is largely due to the fact that what they are investing is actually the money of their depositors. Banks are more likely to give modest loans, whereas venture capitalists generally look for much larger deals. People with bad credit must keep all the documents ready before approaching a bank for loan. The documents include business plan, financial statements available, projections for the business and a repayment plan and the collateral.

Collateral may include hard goods, such as equipment, real estate, stocks or bonds, other personal assets, and personal guarantees. A bank is more likely to approve loans for people with bad credit if they see that the owners are investing a good percentage of the necessary start up capital into the business. To maximize the chances of receiving approval on business loans for people with bad credit from a bank, it would be wise to look at the situation from the viewpoint of the moneylender. A lender would definitely want to know the following details:

The plan of business operation and the anticipated money from the business, The usage of money generated from the business, The plan of repayment schedule by the people with bad credit, Assurance by the borrower to take financial risk in the business, the responsibility to manage business and the number of people going to be involved in management or operations and their responsibility for the proper use of the loan money.

Getting approved for bank loans for people with bad credit depends largely on the criteria and expectations of the lender. While one lender may say no, the next may say yes after reviewing the same loan request, business plan, credit rating and documentation. If the loan is denied, it will be still benefit from learning about the shortcomings and realizing why the loan is rejected. It is useful to know which area or areas that needs to be worked on. It could be improving the credit rating or rethinking the plans to purchase real estate for the business.

The due date and manner of payment will also need to be determined in advance. The detailed payment plan will also have to be worked out according to the convenience. The options of paying the loan back in one lump sum or in various payments on a set schedule will need to be considered.

Normally, bank loans for people with bad credit are made in several payments. Make sure that such a payment schedule works well for the business in conjunction with the projected cash flow. Also find out about the interest rates and get an idea of the going rate for similar loans and negotiate with the lender in this regard. Aware of the other fees associated with bank loans for people with bad credit and about a default of the terms of the loan. Read the loan agreement carefully and have a lawyer review it as well. Some terms are common while some can be negotiated or even waived.

With bad credit rating the loans are extended at much higher interest rates. Therefore, a good personal credit rating is very important to get approval for these loans. People with bad credit will not get bank loans is only a myth. The truth: even with the worst credit, even one day after bankruptcy, an individual with bad credit may still obtain a credit card, a car loan or a home mortgage loan.

People with bad credit must understand, however, that while the doors to the world of credit are not closed to them they will open to a different place compared to individuals with good credit.

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