In some cases, getting personal loans can make or break a small business. However, unsecured loans are among the hardest to get, especially for small businesses desperate for funds. Typically, a personal loan is based solely on a business’s credit score. If a new business has no credit history or worse, bad credit, then getting that much needed loan can be downright difficult if not impossible. However, one company is looking to change the rules to help out small businesses.
Montana Capital Changes Requirements for Personal Loans
The recent changes in Montana Capital’s requirements for personal loans, cash advances, and business loans may be interpreted as good news for those in North Hollywood, California. In a press release sent out on May 17, 2010, Montana Capital laid out the new requirements for unsecured loans up to $25,000. The press release states that the bank is virtually dropping credit scores from its application process and that a bad credit history will not mean an automatic denial. Instead, a team of professionals will examine each case to determine approval. They are estimating an approval rate as high as 95%.
Bad Credit Past Doesn’t Mean Bad Credit Future
According to the press release, Montana Capital does not believe a bad credit history means that a business is a high risk. Since credit companies hold on to bad credit records for 10 years or more, when a business defaults on a loan it is hard to regain good credit. However, that does not mean that the business has not changed dramatically since the default. Montana Capital believes that instead of looking at a credit score that can reflect faults from years past, it should look at where the company is now. If the company is in a better financial position, then loaning the business money is not high risk at all.
No Credit History is Not an Automatic No
Similar to bad credit scores, businesses with no credit have a hard time being approved for personal loans. With no credit history to back them up, some banks do not want to approve the personal loan. This becomes a “Catch 22″ for many new businesses. They need a personal loan to establish credit history but they can’t get a loan because they have no credit history. Montana Capital wants to change that by giving out loans to business with no credit history. Whether or not other banks and lenders will follow along with this new strategy of lending has yet to be seen. If they do, then it will be a big boost for small businesses trying to make it their first year.