Even with the economy sluggishly fumbling through it’s recovery, many businesses are booming or looking to start the next big thing. The problem is that many of the people with the ideas for what should come next are people with bad credit. All it takes is a single default, divorce or other major financial problem to ruin one’s credit for as much as a decade to come. Luckily, just because one does not have good credit does not mean that it is impossible to get a small business loan with a fair rate of interest.

The first and most common way is to permit other persons to co-sign for the loan. By doing so, they take on all the risks and legal responsibilities of the loan. This is actually quite common among small businesses, where members of management or other employees may sign on to the loan in hopes of making their employer do better in the long run. Of course, this means they will be on the hook if their employer defaults, so the loan will need to be amenable to their needs and pay structure as well as that of their employer.

Another way is to offer up business property as collateral. This is especially useful for small businesses which own small store fronts in high traffic areas, as such property will always be valuable. Banks are more willing to lend when they know they will receive property if the loan defaults, although with the current glut in the property market it may not be possible. Still, property is the most common form of collateral, and many storefront properties retain their value in even the worst of economies.

Another way to receive a small business loan even if one has bad credit is to turn to charities and local community developers. These nonprofit organizations often have motives such as urban renewal or fighting poverty, leading them to be very friendly to store owners whose bad credit is not a reflection of their honesty or ability to repay the loan. While their scope is limited and local, often they offer loans with much reduced rates of interest, or will help to sponsor a small business loan by co-signing it.

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