Can I get a business loan without personal credit?
October 18, 2017 9:03 AM Subscribe
I haven't used a credit card for years, and have no debt (I own my house). I am interested in buying real estate for a business that I can't just pay for in cash. I had a good credit score but it doesn't count any more. Will this make it impossible to get financing? Is there anything can I do short term? I would like to know what to expect before talking to banks.
I had a good credit score but it doesn't count any more.
Have you checked your score? Depending on how long it's been since you got rid of credit cards and the like, you may still have a good credit score.
Is there anything can I do short term?
Opening new accounts, especially multiple ones, might actually reduce your chances of getting a loan. Go into a couple local banks (community and regional ones especially) and ask to talk with someone about your specifics.
You may need to use your house as collateral for the loan. What's the ratio of the value of 80% of the house plus your cash in hand to the real estate for the business?
posted by Candleman at 10:14 AM on October 18, 2017 [1 favorite]
Have you checked your score? Depending on how long it's been since you got rid of credit cards and the like, you may still have a good credit score.
Is there anything can I do short term?
Opening new accounts, especially multiple ones, might actually reduce your chances of getting a loan. Go into a couple local banks (community and regional ones especially) and ask to talk with someone about your specifics.
You may need to use your house as collateral for the loan. What's the ratio of the value of 80% of the house plus your cash in hand to the real estate for the business?
posted by Candleman at 10:14 AM on October 18, 2017 [1 favorite]
Response by poster: 1/4 to 1/3. I could try to get more cash (from other investors) up to a point.
posted by redorangeyellow at 10:31 AM on October 18, 2017
posted by redorangeyellow at 10:31 AM on October 18, 2017
Best answer: I believe banks are leery of lending to businesses for real estate. (They know it's easier for you to declare BK and skate, because it's not Your Home that you're cutting loose.) So rates are higher, terms are shorter, and they're likely to require you to accept personal liability for the loan (so they can twist your arm by threatening to take Your Home.) You'll also have to show them how you're going to be able to pay back the loan, and your case is better if you have a going business that you can show your monthly cashflow can cover the loan payments.
I don't know that there's any reason not to start talking to at least a couple of banks, just to see what the landscape is like. It's not like one bank will blacklist you and no other bank will even talk to you after that.
posted by spacewrench at 10:41 AM on October 18, 2017 [2 favorites]
I don't know that there's any reason not to start talking to at least a couple of banks, just to see what the landscape is like. It's not like one bank will blacklist you and no other bank will even talk to you after that.
posted by spacewrench at 10:41 AM on October 18, 2017 [2 favorites]
Business loans are often more expensive than a home mortgage. What about a mortgage on your home to finance the purchase? Go visit a bank, talk to the lender, see what they have to say.
posted by theora55 at 11:43 AM on October 18, 2017
posted by theora55 at 11:43 AM on October 18, 2017
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posted by praemunire at 9:41 AM on October 18, 2017