The credit score is the prime determinant of your eligibility of getting the loan and also deciding the amount of loan that you may take for your business. For many of the small and mediumscalebusiness, having a loan is more of a necessity and less of an option. The lending institutions have certain algorithms in place to identify any risk that might lead to loan default. They want to make sure that the loan applicant can live up to the financial commitment.
The first and foremost factor that is considered by every individual bank and financial institutions is the credit score of the individual or the assets attached. In the case of anunsecured business loan, there is no concept collateral and hence, the factor that drives the process is the individual credit score of the owner and the business potential. There are other factors as well, as the level of documentation, the transactional history, the amount of money required, credit history of the business, business plans, the project reports etc.
On the other hand, when it comes to a secured business loan, the amount of money or the granting of the loan is directly dependent on the value of the collaterals and the assets that are attached to the loan application.
Although it is true that the credit score of an individual is the prime factor on which the application progression for most loans matters, it is not true that if your credit score is below the line, you cannot apply for any loan. The government and the concerned agencies understand the situations where an organization may have a bad credit history and hence, there are few options that can be looked for getting financial support.
- You may surely consider the mortgage loans as the loan amount, in this case, is majorly dependent on the value of the assets that are kept as a guarantee and the officials are also relaxed that if the loan amounts are not paid back, they have the alternative of selling the property and satisfying the given amounts with the funds received against the properties sold.
- Secured business loans can be another option where the collaterals are attached to the application which may be considered by the officials and your application will have a good chance of getting the needed attention.
- You may also look for getting the financial support from the Fintech Companies who are willing to give the money to the organizations on the basis of their merit and potential of the business and not on the criteria of the credit history.
Start-upbusiness loans are also available and mostly, they are backed by government policies. These loans have little to do with the individual credit history and the loans are granted on the basis of the business potential.
Unsecured Business loansare mostly dependent on the credit score because of minimum documentation and no collateral.
But if the credit score is low, what can be the alternatives of getting the loan sanctioned?