Can You Get a Loan with a Low Credit Score?

Couple receiving a bridge loan

Credit score is one of the first things that comes to mind when people need to borrow money. It’s no different in the business world. Business owners worry about credit score when they want to borrow for an expansion product. Property investors and real estate developers worry about credit score when it comes time to acquire a new property.

Credit scores are especially important to banks. They are not so important to hard money lenders like Actium Partners. In short, you can get a loan from a hard money lender – even with a low credit score. Hard money lenders are here to help even when banks are not.

Credit Score Basics

A credit score is a three-digit number that represents a borrower’s likelihood of defaulting on new credit within the first few months. There are multiple ways to calculate credit scores, with the most popular being the FICO method. Fair, Isaac, and Company first introduced it in the late 1980s.

Calculating a credit score requires looking at a number of factors including debt load, payment history, credit history, recent credit searches, and more. The higher the credit score, the better it reflects on the borrower. Low credit scores reflect poorly.

Limitations of Bank Loans

A low credit score is likely to make it difficult to obtain a significant amount of financing from a bank. Why? Because traditional bank loans are beset by limitations. What must be understood is that banks do not loan their own money. They loan money provided by their depositors and shareholders. Thus, every loan decision they make must be made in light of the fiduciary responsibility they have to their funding sources.

This is why banks put so much stock in credit scores. Again, a high credit score suggests that a borrower is credit worthy. Good credit, combined with sufficient income and a low debt load, is often required to convince banks to loan. On the other hand, a low credit score can kill any hopes of getting a loan.

The Hard Money Advantage

Hard money lenders like Actium Partners are firms owned and operated by private investors. We loan can quickly make decisions so your loan can be funded fast – we have closed loans the day after we receive a request.

We have another advantage in that we base our loans on collateral. Borrowers offer some sort of hard asset – usually real property – as collateral on the funding they seek. The value of that collateral is what we are most concerned about.

It is true that hard money lenders look at credit score for the purposes of deciding on rates and terms. However, credit score has very little bearing on whether or not a loan is actually approved. Approval is based mostly on the value of the offered asset and its sale potential.

The Best Option for Poor Credit Funding

It has been our experience that hard money lending is the best option for poor credit funding. We are biased as hard money lenders, but we believe that even borrowers with a low credit score deserve the opportunity to propose solid loan deals. We believe they should have the opportunity to prove their creditworthiness and ability to repay.

If you are in need of business funding and you have a low credit score, do not assume you cannot borrow. You may have trouble convincing a traditional bank to provide the financing you need. Yet you will find hard money lenders a lot more amicable. In short, it is possible to secure hard money even with a low credit score.