How to Get a Business Loan with a low Credit Score?

Here are some tips to help you get a loan with a low credit score:

1. Look at NBFCs and Fintech Lenders

Non-Banking Financial Companies (NBFCs) and fintech companies can be a good option when you need a loan. They are often more flexible than regular banks and focus on how well your business is doing instead of just looking at your credit score.

Why Should You Try NBFCs and Fintech Lenders?

• Quick approval: These lenders are faster at approving loans.
• Less paperwork: They usually need fewer documents.
• Better for businesses: Websites like Lendingkart, Indifi, and Bajaj Finserv are made for businesses like yours.

2. Offer Collateral

One way to improve your chances of getting a loan is to offer collateral. Collateral is something valuable (like property or gold) that you give the lender as a promise that you will pay back the loan. If you can’t pay, they can take the collateral.

Why is Collateral Good?

• Safer for lenders: It makes the lender feel safer because they have possible opportunity to liquidate and cover losses. .
• Lower interest rates: Loans with collateral usually have lower interest rates. You can offer things like property, gold, or savings as collateral.

3. Show Your Business Makes Money

Lenders want to know that your business is making money and can pay back the loan. If you can show your business is making a profit and has a steady cash flow, you’ll have a better chance of getting the loan.

What Should You Show?

• Good sales: Show that your business is growing and earning money.
• Future orders: Show contracts or promises from customers that prove your business will continue to make money.
• Financial documents: Provide documents like bank statements and tax returns to show that your business is healthy.

4. Use Government Loan Schemes

The government of India has special loan schemes to help small businesses, especially those with a moderate credit score. These schemes can make it easier for you to get a loan.

Government Schemes You Can Use:

• Mudra Loans: You can get up to ₹10 lakh for small businesses.
• CGTMSE Loans: These loans don’t require collateral, so you don’t need to give any valuable assets.
• SIDBI Loans: These loans are made for small businesses and startups.

5. Add a Co-Borrower or Guarantor

If you can’t get a loan by yourself, you can add someone else who has a good credit score as a co-borrower or guarantor. This person will help show the lender that the loan is safe.

Why Add a Co-Borrower or Guarantor?

• More trust: A person with a good credit score can help make the lender feel confident in lending to you.
• Better chances of approval: With someone backing the loan, you’re more likely to get approved.

Conclusion

Even with a low credit score, you can still get a business loan. You can do this by trying out NBFCs or fintech lenders, offering collateral, showing your business is making money, using government schemes, or adding a co-borrower. A low credit score doesn’t mean you can’t get the loan you need. By following these tips, you can still get the funds to grow your business.