The Small Business Administration minority business loan program and its comparable local options do not target low credit or low income borrowers. In fact, these loan programs have very high requirements of borrowers. They do encourage diversity in the business market in a given geographical area. If you believe you would qualify for a minority business loan based on your ability to contribute diversity, try these tips to increase your chances of securing the loan with bad credit.
#1 Prepare a Good Business Plan
Business loans are only partly based on your performance on past debts. Business lenders also consider how you are likely to perform on future debt based on your relative ability to secure a profit in your industry. A poorly-prepared business plan will lack the ability to instill confidence in a potential lender. A business plan that already includes pricing estimates to deliver your product or service is best. Your business plan should show actual analysis of the market, your competitors, your demographic and most importantly your potential financial growth over 1, 3 and 5 year projections.
#2 Recruit Experts
Preparing a detailed business plan with financial projections is a difficult challenge without a financial expert. If you are not an expert, consider adding one to your team. In fact, your ability to receive a loan will only be enhanced by adding experts in your field to a team of advisers or owners of the business. Government agencies, like the SBA, do not lend money to those who have not proven
they have the tools to make an endeavor a success. It is okay if you have not proven yourself yet, but you should be able to show you are in close contact with other people who have. This will help overcome a low credit score.
#3 Seek Investors
The financial stability of your business can be enhanced through seeking investors. Investors provide you with the down payment to start a business, and they have the added benefit of offering loans without payment plans or interest fees. You can offer equity or stock in your company in exchange for investor funds. This works particularly well if you are well connected in an industry and have many immediate contacts interested in watching your venture succeed. Even when you seek investors, though, a business plan will be your greatest tool to getting the capital you need to improve your balance sheets.
#4 Seek Grants
Grants for small business owners can be tough to get. Just like investor funds, however, they can give you a financial boost to make you a more attractive borrower. When seeking grants, apply as early as possible. Grant funds run out as the year progresses. You will be competing with thousands of other small businesses who are interested in the grant program. Hiring a professional grant writer can help your chances of securing the funds. You can locate grant writers on job boards. There are also many nonprofit grant writers who will help you edit and refine your application for a low charge.