Small business owners with poor credit find almost all doors to financing closed shut in their faces. No one wants a bad business risk. He is vulnerable and the vultures take advantage of him by offering cash but on Shylockian terms. A merchant who is in this unenviable position must have patience and refrain from making hasty decisions he is bound to regret at a later date.
Never be in a hurry
Because the situation is so bad, the business owner with bad credit may be tempted to go with the first lender he comes across not knowing there are choices. With patience and a little searching online one can easily find a lender with the right approach to helping people with bad credit.
Do not agree to pay application fee or processing fees upfront
Just because one is in a bad position due to poor credit it does not mean one should pay exorbitant processing fees and application charges when applying for bad credit small business loans. Search online and it is possible to find a lender that will not levy any such fees.
Do not agree to set up a fresh merchant account
If a business owner already has an existing account there is no point in agreeing to the lender’s terms that the borrower should open a fresh merchant account. The Lender must be willing to offer finance and work with existing card account. Setting up a new account involves payment of fees and charges to the service provider, an additional burden the borrower can do without it.
Do not agree to install fresh card processing terminals
If a small business owner already has card processing terminals there is no reason to agree to the terms of the lender that the borrower buy or lease or rent additional card processing terminals. If at all such terminals are required, the lender should be able to provide them at no additional cost for the pendency of the loan.
Do not agree to provide collateral
There is no reason for a borrower to agree to provide collateral when applying for bad credit small business loans. As matters stand, borrower has to pay a higher than usual rate of interest. One can find a lender able to offer the small business loan without asking for any personal guarantees or for the mortgage of property or collateral.
Do not agree to a high factor rate
Lenders may take advantage of situations and ask for a high factor rate of 1.5. What this means is that you pay 1.5 times the borrowed amount or a whopping interest rate of 50%. One must select a lender offering a rate of about 1.2 to 1.3 which is fair given the situation.
Making the right decision in selection of a loan provider is absolutely imperative for people with bad credit if they wish to emerge from their situation. A wrong decision could make matters worse. Finding a lender who also provides advice and the loan is like finding a lifeline.