A poor credit small business loan wouldn’t have existed much before the 1970′s because of credit practices being so conservative. Recently, almost anyone living and breathing could be assured of receiving at least a high rate credit card, and often times much more. This included high credit risk businesses with poor borrowing histories. For some lending companies, there isn’t a borrowing application that they don’t like, leaving themselves and the customer open for periodic failures. But those giving a poor credit small business loan are usually not conservative banks but rather companies formed by investors who crave the high risk lending challenge, because the returns can often be astronomical for those willing to take formidable risks. When starting a small enterprise, it is extremely important for a person to know his/her personal borrowing history score. Anything under 640 will spell a death knell for bank consideration.
So getting a poor credit small business loan will fall to a lending company either on line or in one’s local area of residence. Some enterprise owners may first try and secure start up money from friends, relatives and other private sources but usually those resources are limited in their participation. “There is therefore no condemnation to them which are in Christ Jesus, who walk not after the flesh, but after the Spirit.” (Romans 8:1) For newer businesses, bad borrowing histories can often be a shadow that cannot be avoided, especially if unexpected expenses suddenly crop up that had not been anticipated before the start-up began. The original amount of money thought to be enough suddenly disappears in a mountain of bills and the owner is again looking for sources of venture capital to continue the enterprise. If the owner did not have a bad borrowing history before the enterprise start up, it certainly was formed after bills arrived and there was no money to pay them. But the small enterprise owner should not look at another poor credit small business loan as a negative, but rather as an opportunity to rebuild confidence in the company’s name within the financial community.
So getting a poor credit small business loan will probably take one of two forms: a secured lending agreement or an unsecured one. A secured lending agreement will tie the assets or collateral of a small business to the lending agreement itself. In other words, if a business defaults on lending agreement payments, the lender can seize company property, be it buildings or equipment and sell the assets for repayment purposes. In most cases a secured lending agreement has slightly lower risk factors and so the interest rate of the loan will be lower than an unsecured lending agreement. The second type of lending agreement, the unsecured loan, is often called a signature loan because there is no collateral tied to the loan and the only linchpin of the agreement is an individual’s name placed on the dotted line. In this case, the risk is at least a rung higher and deserves a higher interest rate as far as the high risk lender is concerned.
A poor credit small business loan may take the form of a venture cash advance which does offer some advantages over the more traditional signature lending agreement. Companies offering this kind of financial lending agreement base their offer on future credit card sales and do not require collateral, do not require financial records or tax returns and allow for smaller payments when business is slow. But the danger of such an agreement will be the interest rates that can be as high as thirty percent or more for such borrowing privileges. In this case, if a smaller enterprise does not have a very quick infusion of legitimate commerce quite soon after getting such a cash advance, all future profits could easily go towards just trying to keep ahead of the repayment schedule, which could easily grow if payments are not met on time.
Getting a poor credit small business loan may mean applying for a credit card first. If the small enterprise is more of a home based business, a borrowing line of five thousand dollars could be very helpful in making the business a reality. With this type of lending agreement, a person can know what the payback schedule will be each month and can make plans accordingly. The downside to this type of lending agreement is that the credit card borrowing ceiling will be based on the owner’s personal borrowing history and therefore be limited in borrowing privileges. But a very small enterprise just getting off the ground should at least make this option one to consider.
Unfortunately, one’s past decision making priorities always affect the future. For example, a young person may make some very poor financial decisions while in college by handling a credit card incorrectly, or a young couple wants everything now their parents have had forty years to acquire and again abuse easy borrowing privileges and so for years, even decades later, the specter of a poor borrowing history will haunt these individuals making later life more of a daunting challenge. Perhaps a poor credit small business loan might be an answer, but oftentimes the borrowing privilege at much higher interest rates only means more burden and stress. Many people want to live life as if past sins aren’t important but God has declared that our aging and death is a direct result of our past and present rebellion against Him. If anyone flippantly says that sin doesn’t have a consequence, just look down at the liver spots, the wrinkles and arthritic fingers. But for the Christian, these inevitable signs of an impending death are just reminders that we are closer to eternal life than ever before.