How to Apply for a Small Business Loan with No Credit History

Trying to apply for a small business loan without a strong credit history is like plucking money from a money tree. As grandma used to say, money certainly doesn't grow on trees...and money trees don't exist anyway. The good news is that there are business lenders out there who will offer a loan to a small business that has no viable credit history. However, these types of loans generally have interest rates that are through the roof, and the lenders require sufficient collateral. The best way to apply for a small business loan when you have no strong credit history is to build your business's reputation and rating, so it can stand on its own two feet for financing options. Lenders will be less likely to take advantage of you and offer outrageous interest rates and expensive financing options. A few simple suggestions will guide you on your way to a successful application and a loan that will sustain your business.

* Incorporate as a Limited Liability Corporation (LLC)

Some lenders truly are interested in your business plan and the soundness of your small business proposal. Your lack of a strong credit rating may not be a doomsday event. Lenders want to see that you have researched, planned, and constructed a game plan that is failsafe, and a sure fire way to send that message is to incorporate as a Limited Liability Corporation. In doing so, you immediately transfer the focus of your insufficient personal credit history to your newly founded corporation. A new corporation will not have a credit history, so it will accurately show that you are applying for a brand new small business loan on a fresh idea. Lenders are often risk takers, and they might see your new business as a valuable opportunity.

* Intensely Familiarize Yourself with the Plan

When you apply for a small business loan with no credit, you have to creatively and confidently send a strong message to a potential lender that says you are worth the risk. This dynamic message tells a lender that you have a well-constructed failsafe plan that will benefit both you and the lender. Just telling a lender that you need money for your business will get you a swift kick out the door. You must confidently assure a lender that your lack of a strong credit score is nothing compared to your detailed game plan.

* Offer a Repayment Plan

Lenders need to rest assured that as you apply for a small business loan with no credit, you have a repayment plan already under construction. That repayment plan, or business offer, needs to have definitive terms and guidelines. For example, the loan will be paid monthly for how many years starting on what date. Some lenders offer flexible plans, but your lack of a strong personal credit history could make them a little weak in the knees. A viable repayment plan will send the message that you are definitely worth the risk.

* Come Prepared with all Documentation

Most lenders have a list of guidelines and required articles of documentation that must be submitted before a small business loan with no credit is even considered. In general, lenders want to see your personal tax returns for the past two years, personal financial statements from a bank, and your well-constructed detailed business plan. In addition, they may want to know the current status of your business affairs. For instance, do you currently rent an office, do you pay business utilities, do you currently have any clients? The appropriate documentation and your knowledgeable answers will help you in your application process.

* Dress Appropriately and Offer Substance

When you apply for a small business loan with no credit, you must put your best foot forward. Wear your best suit, style your hair, and be ready to give a confident handshake. Never underestimate the value of looking a potential lender in the eyes when you discuss your business plan. Lenders don't want to hear empty promises or a gung ho plan that is sure to fail, so temper your optimism with reality. Lenders want to know that their money will be spent in wise and productive ways, so provide them with substantial ways that the money will be spent. Lavish spending will cause potential lenders to balk at your suggested game plan.

To sum it up, it is true that money doesn't grow on trees, but that doesn't mean that a lender won't see the potential in your business plant. Careful planning, strategic goals, repayment plans, and a kind confident approach will go a long way.