Getting Small Business Loans in Canada With Bad Credit

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Getting a small business loan in Canada with bad credit can be a paradox: on one hand, you might need the influx of cash to get your operations to where they need be, but on the other, lending institutions may not be as willing to provide that much-needed loan.

But that doesn’t mean it’s not possible. We are going to go over the options you have when considering getting a small business loan in Canada with bad credit. From evaluating and improving your credit score to alternative lenders and other measures you could take, here’s how to get a small business loan with bad credit.

Evaluating Your Credit Score

Generally, when lending institutions consider whether or not to give small business loans with bad credit to a startup, or any other company for that matter, they look no further than your credit score. Credit is king in the eyes of banks and credit unions; a bad credit score being a representation of your willingness and ability to repay.

So if you have a credit score of less than 600 – 650, you will probably be declined.

Again, there are ways to get a loan even with a low credit score, just remember that when it comes to bad credit and a startup business loan, guaranteed approval cannot be promised.

Why is it Hard to Get a Business Loan With Bad Credit?

It’s hard to get a small business loan in Canada with bad credit because the overall success of your company does not matter.

Even if your business has been doing well consistently over a sustained period of time and you need the money to open a new store in a different location to maximize revenue, a bad credit score can tarnish your reputation beyond repair. A credit score is an indicator of trust and ability and a low credit score means that your business has neither, regardless of success.

How to Improve Your Credit Score?

When looking to obtain a small business loan with bad credit in Canada, the first thing you should try to do is improving your credit score. Here are 7 steps to improving your credit score, fast.

  • Check your credit report

Your score tells you a lot about where you currently stand and the steps you need to take going forward. Once aware of your score, you know what is affecting it both positively and negatively and you can come to appreciate how to go about navigating it.

  • Pay your bills on time

One of the easiest and most recognizable ways to improve your score. Paying your bills is the best thing a small business can do to appear, and become, a reliable source of payment. Even if everything else is positive, late payments make you, and your business, a credit risk.

  • Reduce the credit utilization ratio

The credit utilization ratio is the amount of credit used up with respect to how much is available. This is one of the first things lenders look at when giving you a score. Ideally, you should try to keep the ratio within 15%.

  • Establish credit accounts with suppliers

If you work with certain suppliers repeatedly with a good payment relationship, establish a credit account with them to increase the number of positive payments to your file.

  • Fill your credit file with instances of positive payment

You need to be aware of the fact that credit agencies do not receive information that certain suppliers and vendors choose not to share. To offset this, you can manually provide trade references on your credit file. When your file has more positive payments on it, you will be looked upon more favorably.

  • Contest errors

Mistakes happen without you being aware of them. You need to make sure that the information on your company record and everything reported on it is accurate. Call to dispute anything that should not be on your account such as late payments and ensure you regularly update the information.

  • Delete negative collections

You need to ask that an agency deletes any inaccurate or negative histories off of your credit report. If you do not do this, there is no point paying off this debt because the history of harmful accounts will still be there.

Small Business Loan Providers

So, the question is: how to get a business loan with bad credit? Although bad credit business loans can be seemingly impossible to get, we have already provided you ways to improve your credit scores and alternative lenders to show that there are still ways to get bank loans for bad credit.

Apart from that, you have more options as well.

NameLoan OptionsLoan AmountInterest RatesWebsite
easyfinancialFixed and Flex (Merchant Cash Advance)Up to $300,0008-22%Visit Website
Merchant Cash Advance, Term LoanUp to $250,000From 6.75%Visit Website
Term Loan, Cash Line, Merchant Cash AdvanceContact the firmFrom 7%Visit Website
Merchant Cash Advance, Term LoanUp to $150,0008-18%Visit Website

ThinkingCapital

ThinkingCapital has been trusted by small businesses since 2006. They provide loans of up to $300,000 in as little as 24 hours, with no Obligation Quote and the chance to get approved in minutes.

iCapital

iCapital makes getting a small business loan in Canada with bad credit quick and easy. A 3-step application form and online banking lets you do things at your own pace.

CompanyCapital

CompanyCapital is all about flexibility. They offer lines of credit, term loans and merchant advances so you can build up and further your company’s reputation, while you pay off your loan.

Lendified

Lendified is another great options for companies considering small business loans in Canada with bad credit. Offering up to $150,000 in fast and affordable funding, free personalized quotes and terms up to 24 months, Lendified looks beyond your credit score.

Getting a Small Business Loan With Bad Credit: Your Options

  • Put Up a Collateral

If you’re finding it troublesome and increasingly tricky to get a small business loan in Canada with bad credit, you should think about a secured loan. A secured loan consists of putting up collateral, typically an asset you currently own.

Always talk things through with the institute financing the loan to be aware of your options and the risks associated with them. A secured loan is a great option for start up business loans with bad credit because they give you that fast influx of cash. But if you default, your asset will be seized.

  • Use Alternative Lenders

An alternative lender, like the ones we provided in our list, are the people you go to when you’ve your application for a business loan has been rejected from the bank or established lending institutions.

Private institutions are more considerate and frequently do not even run background checks on credit scores and histories. What makes them so appealing is their flexibility, convenience and the fact that they give you a chance. In any given city, there are numerous private companies and lenders who do want to help you.

  • Consider Merchant Cash Advances

If you’re having issues with cash flow, Merchant cash advances are great ways to get fast cash quickly. Certain alternative lenders like CompanyCapital provide them for small business loans in Canada with bad credit. The lender will allow you to loan your required amount of money and in return, will take a percentage of your everyday credit or debit card transactions.

This will continue until you have fully repaid the amount you initially took. After you have fully repaid the lender, the percentage on your transactions is gone and you have successfully paid off the advance.

Final Words

While it may be frustrating, tricky and often counterintuitive trying to get a small business loan in Canada with bad credit, there are options out there and you should never give up.

First, take a look at the internal workings of your business. Try to increase your credit score from the ground up. Make payments and collect and store positive payments to make your credit and transaction history something banks and lending institutions want to see.

You can also go to alternative lenders: flexible, lenient and impartial. When it comes to start up business loans for bad credit, guaranteed is not a word you hear much, but with alternative lenders, it is the closest you could get.

Otherwise, you could prove your trust by putting up collateral and merchant cash advances. You put a lot on the line but it shows that you have faith in your ability to pay the loan back. That kind of faith is contagious.

The question now isn’t how to get a business loan with bad credit. As has been shown, bad credit business loans are deals that have been made. It is now what are you willing to do to secure the loan? Take into careful consideration your business’ history, your capabilities and how much you are willing to risk.

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