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Bad business credit score? Here’s how to find the best alternative lender

April 9, 2019 / NEWS

Bad business credit score? Here’s how to find the best alternative lender

If your business needs access to funds quickly, having a bad credit score does not mean you have to suffer. While larger corporation banks may avoid giving loans to businesses with bad credit scores, private lenders offer alternative loans for businesses. But which alternative lender is right for you? Below we explore how to identify the best alternative lender for businesses with bad credit…

1. Check the lender’s minimum requirements

A good lending company should clearly outline their minimum requirements for a loan, either on their website or through verbal and online communication. Not all lenders will be transparent about their minimum requirements and this should be considered a red flag against the lender as a lending company should discuss and advertise their policies openly.

Accepting low credit scores doesn’t mean a lender is looking to capitalise on small failing businesses, rather it means the lender identifies that a poor credit score doesn’t automatically mean a business is failing. For example, a good lending company will analyse the monthly revenue and cash flow of a business in addition to its credit score.

2. Do they conduct a soft check or hard inquiry?

Unlike a hard inquiry, a soft check will not lower your credit score. Only consider lenders who conduct soft checks as this allows you to receive multiple quotes from different companies without your credit score being affected.

A soft check can involve allowing the lender to view your bank statements to assess the cash flow of your business, bank statements can usually be provided electronically for convenience. Hard inquiries are a more lengthy process and can take multiple days to be processed; this should be considered if your business is seeking a same-day loan.

For a soft check to be completed a business is usually expected to provide the following information:

• Business name and address
• Tax ID number
• Estimated annual revenue
• How many years the business has been operating

3. Consider how strong their customer service is

Finding the best alternative non-bank lender can be overwhelming, taking into account how strong a lending company’s customer service is can provide great insight into how they operate as a business. Consider how easy it is to contact the lender too; for example, do they answer phone calls quickly or are you left on hold for hours? Do they have a chat feature? A live chat feature can be a great resource for getting any questions answered quickly. When you communicate with the lender, whether over the phone or via chat, they should be advising you on your best bad credit loan options, not trying to push a sale from you. View reviews of the lender or ask for testimonials from previous clients; any good lender should be happy to provide this information for you.

4. Ensure you are clear on the loan terms

As mentioned previously, private lenders in Australia should be transparent about their loan terms. You should be fully aware of your loan options, such as short-term and long-term loans, and whether or not it is a fixed-rate loan. A bad alternative loan provider may try to sneak hidden costs into your contract such as an origination or monthly maintenance fee, but a good loan provider will be open about costs and should happily go into detail discussing payment plans with you.

To avoid damaging your credit score further, incurring hidden fees and receiving poor customer service, it is important to exercise due diligence and research your bad credit loan provider before making any commitments for your business. Use the criteria and guidance above to find the best alternative lender for your business.

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