What Is Subprime Lending?

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What Is Subprime Lending?
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What is Subprime Lending?
Subprime lending is a financing option designed
for small business owners who dont have the
credit needed to qualify for a traditional
business loan. A borrower can have bad, slow, or
no credit and still qualify for a subprime loan,
as subprime lenders have more relaxed
underwriting. The caveat is that because the
lender assumes more risk in loaning money to a
company without a good credit rating, they
usually charge higher interest and increase fees
to take on that risk.
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How Does a Subprime Business Loan Work?
Subprime business loans vary from lender to
lender. But overall, they work much like most
small business loans. You receive funding upfront
and repay it with interest over time. However,
youll often have less time to pay back a
subprime business loan than a traditional term
loan. A flexible subprime lender will consider
many variables when determining your loans
interest rate. For instance, collateral, such as
inventory, equipment, or real estate, will bring
the interest rate down significantly.
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Doing your homework and working with a small
business lender who has built a solid reputation
in their field and caters to subprime borrowers
is essential. Its also vital to examine which
types of fees each lender charges for the loan to
figure out the actual cost of your loan. Most
subprime business loans are issued by online
lenders, as traditional lenders such as a bank or
credit union will require more extensive
collateral and a good credit record before even
considering issuing a subprime loan.
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Pros of Subprime Business Loans

• A subprime loan can build business credit - If
  youre a startup just getting off the ground or
  have very little or no credit history, a subprime
  business loan can help you generate a credit
  history for better business loans and terms down
  the road.
• Flexible loan criteria - Subprime loan
  underwriting is more lenient than standard or
  prime loans, which requires a borrower to have
  near-perfect credit.

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• Access to the funding you need - As a business
  owner, you cant afford to let a lack of money
  impede your progress. Its vital that you have
  access to funding options regardless of where
  your credit stands. A subprime business loan can
  help you get financing until your credit is
  established. Depending on the situation, you can
  get funding for equipment, inventory, working
  capital, or a commercial building.
• Faster funding - A prime business loan with a
  traditional lender can take months to get
  financing. With a subprime lender, you can get
  fast funding in as little as 24 hours after
  approval, depending on which lender you use. This
  can make all the difference when you have a
  business opportunity that requires immediate
  action.

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Cons of Subprime Business Loans

• Subprime loans cost more - Lower credit scores
  generally mean you will pay higher interest than
  borrowers with good credit. And typically, you
  also have to pay the loan back quicker, which can
  put a lot of pressure on your business.
• Collateral is often required - While collateral
  is often needed for prime types of loans as well,
  its even more common with a subprime loan. This
  is because the lender assumes a higher risk with
  a subprime loan and needs a guarantee that they
  can recover their money if the buyer defaults.
  The primary risk to you is that you can lose any
  assets used as collateral if you dont make
  payments on your subprime loan.

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• There may be limits on how much you can borrow-
  Some lenders look ONLY at your personal and
  business credit scores and history, while others,
  like Biz2Credit, look beyond your credit to
  establish your creditworthiness. For instance,
  they may look at how long youve been in business
  or where your business is located. Theyll also
  examine how much revenue your business has, its
  cash flow, and your business debt to determine
  your ability to meet its financial obligations
  and pay back a business loan. A good subprime
  lender will also look at other factors outside of
  your company, such as political and economic
  trends that might be influencing a temporary
  downturn. Forecasts for your industry may also
  come into play.

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Why Choose Biz2Credit?

• Trusted partner for franchise funding
• Biz2Credit was founded in 2007 and has provided
  more than 10 billion in loans.
• Dedicated support team
• Tailored financing solutions

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