Big success begins with big dreams and owning your own business is dream that many entrepreneurs with bad credit feel is out of reach. You can qualify for a Small Business Administration (SBA) loan with bad credit, depending on a few factors. The first step to qualifying for a SBA loan is to apply for a traditional loan from a bank and be turned down. Take your letter of refusal to the SBA and be prepared to sell your business idea, along with your ability to pay back the loan.
The SBA will require a well-thought out business plan that details your projected costs and future profits. With bad credit, an sba business loan, loan officials will likely require you to provide a large amount of cash down plus enough collateral to cover the dollar amount. While SBA loan rates are typically lower than traditional bank loan, expect the rate you pay when you have bad credit to be significantly higher than it would be if you had a good credit rating.
Keep in mind as well that there is bad credit and then there is really bad credit. If you have numerous foreclosures, bankruptcy, outstanding judgments on your credit history, you may still face an uphill battle in financing your dream business. When this happens, you have a couple of options. Look to friends and family to finance or to become business partners or spend a year or two cleaning up your credit before you try for a SBA loan again. A good business plan means a business is profitable over time. If your business is a good idea today, it will still be viable after your credit has improved.