Bad credit business loans are commercial loans that are offered to businesses with bad or poor credit scores. They are available in different forms. However, they are principally categorized into secured bad credit business loans and unsecured bad credit business loans. Concept of Bad Credit Business Loans Usually, the commercial lenders or commercial creditors do not want to lend to businesses that do not have an adequate credit rating. Their credit report is analyzed by the creditors with the help of the credit report bureaus and if they find it unfavorable, they do not intend to lend to this type of businesse. For receiving the approval for obtaining a business loan, it is usually necessary to have an excellent credit score. However, the problem associated with obtaining a business loan by bad credit businesses has been solved to a great extent as a number of bad credit business lenders have come up with a comprehensive range of loan products. However, the terms and conditions associated with this type of loan are slightly different from the good credit business loans. Types of Bad Credit Business Loans Bad credit business loans can be categorized into two types:
Secured Bad Credit Business Loans: For obtaining a secured bad credit business loan, it is necessary to maintain a security or collateral against the loan. As the loan is secured in nature, the rate of interest (APR or annual percentage rate) charged is comparatively lower than the unsecured bad credit business loans.
Unsecured Bad Credit Business Loans: For getting an unsecured bad credit business loan, it is not essential or mandatory to keep a collateral or pledge against the loan. As a result, the rate of interest or APR charged is higher than the secured bad credit business loans.
Purposes of secured bad credit business loans:
Expansion of business.
Enhancing cash flow.
Tapping opportunities for new business.
Other commercial intentions.
Purposes of unsecured bad credit business loans:
Purchasing tools and equipments.
Buying plant and machinery.
Improvement in business.
Obtaining franchises and licenses.
Last Updated on : 9th July 2013