How to Get a Small Business Loan with Bad Credit

There are three types of loan programs offered by the U.S. Small Business Administration. They are the 7(a) Loan Program, Microloan Program, and the CDC/504 Loan Program.

The most used and most basic type of small business loans are 7(a) loans, which come from section 7(a) of the Small Business Act. (SBA). This Act is designed to assist for-profit businesses unable to get financing from other resources. The Act requires the loan program to meet SBA size standards, be for-profit, not already have business or personal internal resources providing financing, and be able to show repayment. The maximum length of a small business loan is 25 years for real estate and seven years for working capital, under the Act.

The Microloan Program provides a way small businesses and some not-for-profit child-care centers can get small, short term business loans. The maximum microloan loan amount is $50,000, but the average loan is $13,000.

The CDC/504 Loan Program is a long-term financing tool for small businesses. It has fixed-rate financing. CDC stands for a Certified Development Company, which is a private, not-for-profit corporation contributing to economic development within its community. 504 Loans are required to be used for fixed asset projects.

If you are a company with bad credit, there are several things you can do to boost your credit rating. In an article by the Small Business Review, a Credit.com advisor points out that many small business owners either don’t know their scores, think they can get around a low credit score, or assume its not important to their business.

The above loan programs may be especially beneficial to anyone trying to get approval for veterans small business loans because veterans often have difficulty securing financing on start-up businesses, particularly when they are disabled without a steady income.

Here are a few ways small businesses can “clean up” their credit profiles:

• Know your credit score.
• Don’t overextend your credit line.
• Generate positive cash flow.
• Manage your personal credit carefully.
• Clean up your balance sheet.