Having a bad credit record can affect your chances not only for getting personal loans but also as a business owner to secure business bank loans from financial institutions. Banks and other financial institutes look at the business owner’s credit record as one of the defining factors before approving a business loan. It is then crucial that one improve or maintain their credit rating score before considering applying for a bank loan.
Nevertheless, the reason you are here is most probably because you are in need of a loan for your business despite having bad credit. Do not give up as there are other options to consider although being in this situation. Read on to find out more.
Firstly, what is a bad credit score?
A person is deemed to have bad credit when they have defaulted payments on previous personal loans or credit card bills. A credit score is given to a person depending on his/her financial risks, and the more a person defaults on their loan payments, the lower the score. How is the score being calculated, no one knows for sure, but a few indicators include default payments, applying for too many credit line at once, having a high debt-to-credit ratio, and many other factors which you can read here.
Overall, a person with a good credit score is deemed a worthy paymaster by the banks and other financial institutions. Hence that person would get a larger loan amount and also more likely to get approved bank loans.
If you do not know your credit score yet, you can get your credit report at the Credit Bureau (Singapore) Pte Ltd .Your report will look something as below:
Each person has a tabulated score at the bottom of the report. The scores can be defined in the table below, with AA being the best and HH the worse:
Mistakes also do happen in the report itself, so be sure to check your credit report every six months to a year as it can profoundly affect your chances of securing a loan.
What can you do with a bad credit score?
If you just found out that you have a low credit score, do not fuss so much about it. Here are some things you can do about it.
- Apply for a smaller loan amount
Most borrowers won’t be approved for the maximum loan amount unless their financial standing and credit aspects are extremely strong and stable. Again, you still stand a chance of getting a smaller loan amount approved. However, keep in mind that after you get the approved loan amount, pay back the loan repayments in full in order show your ability to repay your loan and banks will find it favourable.
Now you can apply for a small loan amount with FS Bolt! A revolutionary mobile app that enables business owners and SMEs to get business of any amount, up to SGD 50k!
- Settle your outstanding debt
A bad credit score also indicates the presences of outstanding debt.
You can opt to settle your debt first before proceeding to apply for a new business loan. Call and talk to your bank to rearrange payment amount and options with lower interest and longer periods. Aside from that, you can also go into a debt consolidation plan (DCP) with your bank which offers debtors the option to consolidate all his unsecured credit facilities (such as credit cards and some types of unsecured loans) across financial institutions with one participating financial institution. This makes loan repayment easier, and one does not have to resort to unlawful means of getting funding.
- Go for non-bank financial institutions
You can also widen your pool of options to apply for a loan from other non-bank financial institutions such as FS Bolt. Created by Funding Societies which is registered under the Monetary Authority of Singapore, FS Bolt offers business owners an unsecured loan to get funding of up to SGD 50k despite business owners having bad credit. They do go through a business owner’s past repayment history, but are not as stringent as local banks and other financial institutes. Therefore, the likelihood of a loan approval from FS Bolt is higher than banks.
Besides, there are no collateral needed. FS Bolt trusts the creditworthiness of business owners. It is also a call for business owners with a bad credit score to rectify their repayment habits.
If you as a business owner have a hard time getting loans due to bad credit, it is not the end of the world for you.
Business loan options such as FS Bolt offers SMEs owners with a better solution. Nonetheless, this does not give business owners an excuse to abuse and take advantage of an approved loan. Repayments still have to be made, and the outstanding debts still have to be settled. It is also a good call to get a good credit rating as this will impact not only your business but also your future personal loans.
Funding Societies – Capital Markets Services License No: CMS100572-1 issued by Monetary Authority of Singapore (2016)