What Do Lenders Analyze For A Bad Credit Business Loan?

Photo of author

By Dzhingarov

There are nowadays numerous bad credit business loans available for those that need financing and do not have a stellar credit rating. Obviously, lenders will analyze credit score but there are many other things that are taken into account.

In the event that you want to increase the possibility of being accepted for a bad credit business loan, you want to do everything that you can to increase credit score. At the same time, you should be aware of the following important factors that are taken into account by lenders when accepting or denying a bad credit business loan.

Annual Revenue

This is a very important factor that is often analyzed during the loan application process. If you have a high revenue, there is a higher possibility of being accepted. This should definitely not be a surprise since everything boils down to how likely it is to pay back the loan.

High revenue practically proves that the business owners know what they do. Lenders do invest in your business by offering financing.

At the same time, remember that annual revenue sets loan size expectations. You are normally offered up to 12% of the company’s annual revenue with a regular bad credit business loan.


The fact that you have high annual revenue is practically worthless in the event that the business is not profitable. It is true that a business does not actually have to be profitable to be considered for a bad credit business loan. However, if it is profitable, it does increase the chances of being accepted.

Current Debt Obligations

There is a reason why credit score is low so the lender is interested in making sure that you do not have to deal with current debt obligations that are too high. In the event that you now pay back a business loan, it is difficult to qualify for the second one, especially if it is one intended for bad credit businesses.

Also Read:  Promoting Businesses Through Quality Video Content

Lenders rarely want to have a second position in front of another lender. In the event that something goes wrong, it is the original lender that puts the lien on the business.

The good news is there are lenders that do not care much about the second position. This happens when the lender is confident in the repayment potential that a business shows. Also, if there is not much debt remaining with the original loan, especially when no problems appeared during repayment, it is more likely that you will be accepted.

Business Cash Flow

Most bad credit lenders are interested in knowing how the business manages cash flow. They are particularly interested in the amounts that are usually available. The main concern is that you will not be able to make payments on time. With proper cash flow management, you demonstrate the fact that you know how to prioritize vital expenses. Cash flow analysis is particularly important in bad credit situations.

Usually, the lender wants to look at bank statements from the last 3 months, as a minimum. Based on financing option considered, you might be asked to show more.

If the business has an NSF history, it is a good idea to wait until applying for the bad credit business loan. During this time, managing the bank account is very important.

Past Credit History

This is a vague requirement and can significantly vary from one lender to another. The idea is that lenders analyze the credit report and look at your history. Besides the credit score, the lender might be interested to learn about bankruptcies and foreclosures.

Also Read:  Dealing With Employee Burnout