Pages Menu
Categories Menu

Posted on Jul 2, 2014 in Financial

How to deal with bad credit as a small business

Usually the phrases small business and bad credit go hand in hand, because it is difficult for a small business to secure capital and then remain competitive on the market for extended periods of time. Ever since the economic crisis in 2009, when many small and medium companies had to close their doors and many others remained deep in debt, bad credit has become a common thing in the credit history of a small company. The situation started to improve for small businesses in the past few years especially in terms of bad credit loans. Not many banks are willing to lend money to small businesses especially if they have bad credit, no matter how valid the reasons behind the average credit scores might be. The Great Recession hit small businesses hard because they did not have the necessary capital to cover their loss, so they had to borrow the money in order to stay afloat on the market. Falling behind in payments and failing to redeem the cash flow of the company are just two of the problems small companies had to deal with during that period.


People sometimes take years to clear their bad credit history, but things are even worse for a company. Small companies need even more time to erase the red marks in their credit history. A person can simply reduce expenses when she/he needs to cover their bad credit, but a company can only stay competitive on the market by investing in new technology, services and products. It is almost impossible for a small company to erase its bad credit without securing capital from investors or without getting a loan. In order to get rid of your bad credit, you need to make profit and to achieve this endeavor you need to invest money in your company for marketing purposes or in order to improve your products and services. Money must always flow in a company, so having capital is mandatory. The problem is that banks will not usually lend money to a small company that has a bad credit. Fortunately, there are still private lenders that provide bad credit loans for small businesses. This is the reason why many companies survived the economic crisis a couple of years back.


For a small company, even a short-term financial problem can become fatal, if it drags on and on. When encountering a financial crisis, it is important to deal with it in due time. This is why small companies secure their capital through bad credit loans and ultimately use the money to get out of their financial crisis. Falling behind in payments is something all small companies go through at some point, but especially after an economic crisis that affects the whole world like the one in 2009. In this situation, the best solution for a small company is to take out bad credit loans. This involves finding a private lender willing to give money to a company that does not have a perfect credit history.