Just because you have a bad credit history doesn’t mean that all doors are closed to making your business a success. Creditors will pull out your credit history to see how you have managed your finances in the past, and if you were able to meet repayments deadlines. Unforeseen circumstances could’ve prevented you from keeping a squeaky-clean credit history. Getting a commercial loan can be the first step into securing a better financial future, and we have broken it down for you into five simple steps.
Know what it means to have bad credit
You might have been applying for a loan to a few financial institutions, and you keep wondering why your loan application keeps getting disapproved. This could be because of bad credit. The following cases can make you have a bad mark on your credit history:
- Missed payments on a bill, credit card, or mortgage debt.
- Having listings such as defaults, bankruptcy, court summons, and court writs.
- A bad line of lender credit history.
- Having too many debts on other credit or loans.
This can make you come across as a high risk to lenders who will either give you a loan with a high-interest rate or choose to not touch you at all.
Security for a commercial loan
Whether you are needing a commercial loan to upgrade your business, invest in property, or purchase equipment to ensure your business runs smoothly you will need security. You are already considered to be a high-risk lender and in order to protect themselves, lenders need security in the form of a house or a car. One way to get your loan readily approved is if you use your assets as collateral. This will also help you get competitive interest rates and flexible repayments. Bad credit might limit your options, but it doesn’t mean you cannot shop around and look for the best deal that will suit your budget and financial needs.
Types of real estate that are acceptable as security
The ideal property is a non-specialised residential or commercial property. This is basically property such as:
- Standard commercial property
- Residential property
- Retail premises
- High-quality rural properties
What will lenders look at to approve your loan
To make the loan application a smooth process for you, it’s best to always look at what lenders require from you beforehand. Most banks will look at your financial performance for the past three years. If your business is new and doesn’t have any records extending to three years, then will need bank statements, a detailed financial projection and a business plan. It’s advisable that you look for any holes before approaching a financial institution.
If you are experiencing financial stress reach out for help
Keeping your head up the financial murky waters that tend to drown us from time to time is difficult. A Household Expenditure Survey done by the Australian Bureau of Statistics (ABS) found that common financial stress that people experience is:
- Spending more money than what you make.
- Being unable to pay registration or insurance on time
- Pawning off items to make ends meet
- Seeking financial help from friends and family
- Being unable to pay utility bills
If you are experiencing financial stress is better not to suffer alone. You can get free financial counseling from the National Debt Helpline by calling 1800 007 007.