The following are the ways to get Business Loan with Low CIBIL / Bad Credit
1. Secured Business loans
Secured loans are where the person/s when starting a new business can pledge any asset like gold or property that they have as collateral to get a loan. In the case of an existing company taking a loan for any purpose can pledge any of its assets to acquire the loan. This is the best way for people or companies with bad credit to definitely get a loan and at good terms.
Although banks are reluctant in providing business loans to individuals with a bad credit score, they may be willing to do so under certain conditions. For example, some banks may agree to provide the loan at a high-interest rate. Further, if you have a fixed deposit with a bank, you may be able to obtain a loan up to the amount of the deposit held.
3. NBFCs with focus on business loans
An unsecured loan is offered to individuals by the banks and NBFCs without any collateral. While it may be difficult to get an unsecured business loan for people with bad credit, it is possible with higher interest rate. Most banks reject your bad credit business loan application as they do not see your creditworthiness beyond credit score and credit report.
There are Non-Banking Financial Companies (NBFCs) that look at your creditworthiness by combining data and technology to approve the loan. They are more flexible with credit score and credit rating. Though the interest rate may be high, you may obtain an unsecured business loan based on your business plan proposal.
4. Overdraft Facility from your Bank
Overdraft is a form of loan in which a total credit limit is sanctioned by the lender. The interest rate is calculated only on the utilized amount form the total sanctioned limit. If a borrower has a good relationship with the bank and manages a current or savings account with the same bank, then he/she can avail overdraft and can use it for business related purposes. Banks generally do not check CIBIL score before sanctioning a credit limit.
5. Web-Based lenders
In the past, you may have failed to pay your credit card bills or loans which might have affected your credit score. This does not mean you become totally ineligible to get a loan. There are web-based lenders targeting individuals who need urgent funds with bad credit rating. The analysis of creditworthiness differs from the traditional banking system and the process is quicker and loans are approved and disbursed without any delay.
6. Request your current lender
Another way of getting an unsecured business loan is to approach your local bank where you have the existing loan or credit card. Explain to the bank manager your situation, past mistakes and current business operations and request for an unsecured business loan with low interest. It can get you a business loan without much effort provided you display a promising repaying ability during the negotiation.
7. Business credit card
A business credit card can also be used to get a line of credit. The credit eligibility may vary depending on your past payment history, etc. Although obtaining a business credit card may be easier than obtaining a loan, it’s important to know that the interest rates associated with such cards are typically very high.
8. Revenue-based Loan
In this option, the business receives funds in full upfront, and agrees to repay the loan based on a percentage of the future monthly revenue. The repayments continue until the principal and interest are fully paid. For a revenue-based loan, the company must have a good credit score and must make above Rs 100,000 sales in a year. Moreover, the loan amount cannot exceed 10% of the company’s revenue.
It is a small loan made for emerging small businesses and startups. A microloan is offered by nonprofit organizations called as microlenders. This type of loan typically has repayment terms of up to 7 years and offer favorable interest rates compared to those available through online lenders.
10. Peer-To-Peer Lending
With a low CIBIL score, getting a business loan can be difficult. You can try getting a loan from peer-to-peer lending (P2P). The amount of loan offered by such entities is quite small and there is no need for any kind of collateral or security from the borrowers. However, the rate of interest charged for these loans is quite high.