How to Escape the SBA Loan Bad Credit Trap

If you are considering a Small Business Administration (SBA) loan to increase your working capital, then there’s some good news and bad news that you need to know.

Pros & Cons of SBA Loans

First, the good news: compared to many other types of loans, SBA loans are relatively cheaper (in terms of total cost of borrowing), and the repayment period for some loans can be quite long — with some exceeding 10 years.

However, there are some significant limitations and drawbacks with SBA loans, including the biggest one that can be called the “SBA loan bad credit trap”. That brings us to the bad news.

What You Can Expect from SBA Funding

Here’s how the story unfolds: you invest a substantial amount of time — and likely cost — putting together a comprehensive application for an SBA loan. And by “comprehensive” we don’t just mean filling out a form or two.

We mean a large, multi-document package that includes a robust business plan, financial statements, marketplace analysis, vendor/supplier/customer agreements, resumes of key personnel, list of debts, list of collateral to secure to loan, purpose of the funds (e.g. inventory, equipment, staff, marketing, etc.), and of course: personal and business credit reports.

And that’s where, for many would-be borrowers, things go from tedious to terrible.

The SBA Loan Bad Credit Trap

Obtaining an SBA loan typically requires excellent personal and business credit — which is something that many business owners, and especially those who haven’t been in business for a few years, simply don’t have.

Unfortunately, this means falling into the aforementioned “SBA loan bad credit trap”, and there’s no way out. It doesn’t matter how viable or thriving your business is, how strong a relationship you have with your bank (banks facilitate SBA loans), or even how much collateral you have.

Without excellent personal and business credit scores, your application is dead in the water.

How to Avoid SBA Bad Credit Pitfalls

Fortunately, there is indeed a way to escape the SBA loan bad credit trap: avoid falling into it in the first place by connecting with National Business Capital & Services.

While we can help you get an SBA loan, we recognize what will be approved and can find other business financing solutions that:

  • Do not require excellent personal and business credit. Impaired or even bad credit is usually fine. We’re far more interested in what you’re doing today and where you’re headed tomorrow, than what may have transpired in the past.
  • Do not require collateral to secure the loan. Obviously, you’ll need to promise to pay back the funds per the agreement. But your personal and/or business assets aren’t at risk of immediate loss and liquidation if you miss a payment.
  • Can be used for any purpose that you deem suitable. We think that you — not us — are in the best position to make profitable and strategic decisions for your business.
  • Do not involve a time consuming and complex application. Our secure online application takes about 60-seconds to complete, and can be done anytime (including right now if you wish to get started).

In addition, we review applications immediately, and have an SBA approval rate of over 90%. Plus we provide loans throughout the year — whereas SBA annual loan funds are typically 100% allocated by early autumn.

Simplified Qualifications for Low-FICO SBA Financing

  • 2+ Years in Business
  • $120,000 in Annual Gross Sales
  • 685+ FICO (Lower Score the higher your totals are for the above two qualifications)

SBA Loan Terms, Rates and Amounts

Every business is unique, with their own goals for SBA funding. At National, we find the perfect SBA financing option for your specific business needs.

  • SBA Loan Amounts Available: $50,000 – $5,000,000
  • Flexible SBA Term Lengths: 10 – 25 Years
  • Time to Fund: Expedited processing at National can equip you with SBA funds in as little as 45 days – that’s up to 3X faster than the average bank.

To find the best interest rates, term lengths and amounts that work best for your business, use the SBA loan calculator by clicking the link below, and use the sliders to determine the best option for you.

Go to SBA Loan Calculator

Apply for SBA Loans with Bad Credit Today

Give National’s financing experts a call at (877) 482-3008 for a free consultation. Or, fill out our 1-minute application online to receive SBA funds in as little as 45 days.

Learn More About Alternative SBA Loan Options

To learn more about how we can help you steer clear of the SBA loan bad credit trap — so that you can quickly get the working capital you need to keep your business strong and successful — contact the National Business Capital & Services team today or fill out our two-minute application so we can find you the best financing options.

About the Author, Megan Capobianco
Megan Capobianco is the Marketing Manager at National Business Capital. Megan is passionate about helping business owners along their journey - providing them with relevant content they can use in their day-to-day operations.