Bad Credit Business Account - What Are Your Options?

There are few to no options available for bad credit business account from banks or traditional financial institutions.  This has occurred over time as the market for credit has tightened and lenders have instituted tighter rules regarding the issuance of credit.  This tightening has frozen out individuals and businesses that have less than perfect credit and sent them to non-traditional lenders that may offer terms that are more expensive.

Bad Credit Business as a Risk

Seeking a bad credit business account is not impossible but will be obtained through a traditional financing source.  Bad credit accounts represent a significant risk and are typically classified as subprime debt. Traditional financial institutions have moved away from dealing with subprime debt for fear that such debt will cause their balance sheets to be thrown off and their profitability to be reduced, particularly when such debt defaults.

Non-traditional Lenders for Bad Credit

A business with bad credit may seek out other types of lenders that are not traditional lending institutions in order to establish a business account.  These include check cashing and subprime lenders that require security or collateral in exchange for the extension of credit.  These types of providers may also charge excessive fees since they are not regulated in the same way that traditional lenders are and this fees and charges may be costly to the business.

Working with a Financial Professional

Another option for a business with bad credit is to work with a financial professional that can help reduce some of the debts and obligations that are creating the bad credit situation for the business.  These individual can work to consolidate or limit (in some circumstances) old debt and work to clean up the balance sheet for the business.  This process will cost the business money but may be a worthwhile exercise in order to approve the business’s credit rating and eliminate barriers to access for future business accounts and credit.

Beware of Offers to Wipe Credit Clean

A business should be leery of offers or promises of bad credit repair or bad credit loans with no or limited documentation.  Such offers or promises may be a ploy to assess fees and charges that are excessive for the business or commit abusive lending practices against a vulnerable business concern.  Credit repair services and other companies that offer to wipe debt clean should also be viewed with a skeptical eye as an option to helping a business with bad credit improve their credit worthiness.

Engaging in negotiations with the business’s creditors and paying back or making arrangements to payback debt obligations can help to improve the business’s credit outlook long-term and improve their ability to obtain debt financing.