Knowing Your Options For Business Loans With Bad Credit
By Shane Dayton
How To Get A Business Loan When You Have Bad Credit
A majority of business owners focus on banks when trying to get funding for their firms. Unfortunately, the success rate of obtaining business loans can be very low, especially for business owners who have bad credit. This has always been difficult, but business loans for bad credit do exist and a determined business owner needs to learn how to hunt down the funding that will help them drive their business to the next level.
Traditional Lenders Might Still Be An Option
Recently it appears that creditworthy small business owners are finding it easier to obtain business loans from traditional lenders. However, bad credit is a problem for a high percentage of today’s small business owners, particularly after the recent financial crisis we all suffered through. It is still difficult for small businesses – even those with good credit ratings – to obtain loans from traditional banks, than it is for large businesses.
The biggest roadblock that a majority of business face when attempting to grow their businesses is access to capital. When these companies are able to obtain a business loan, they are able to increasing their marketing, upgrade or purchase equipment, buy more inventory and hire additional employees. Bad credit business loans are essential to help many up and coming businesses get started and grow into their full potential.
Business loans for bad credit are what many entrepreneurs rely on to grow into a full scale business.
Starting Your Search For A Great Business Lending Option
So what are the steps that business owners with bad credit can take so that they have a better chance of being approved for a business loan?
Fortunately, there are some alternative funding solutions and programs that give business owners the chance to receive a business line of credit or business loan, despite having bad credit. Other factors are instead considered, like credit partners, credit card sales, bank deposit history and other sources of data. In other words, while having a poor credit score definitely doesn’t help matters there are options for business owners.
The following are a few factors that can help you obtain a business loan even if you happen to have bad credit:
Businesses that have bank deposits on a regular basis can get revenue-based loans. These programs are based on the amount of deposits that a business bank account receives each month. A business owner can typically get a business loan that is the equivalent of 10% of the business’s yearly gross deposits, even if they have bad credit. Another one of the advantages of these kinds of programs is that it doesn’t take very long to get funded. It usually only takes about 7 business days to receive your money.
With these programs, you should be aware of the fact that the loan term may be up to 18 months. Interest rates will be slightly higher than what is offered by traditional banks. No tax returns, financials or collateral are required. Repayments are made on a daily basis in small increments from a business bank account via ACH.
Credit Card Sales
With this kind of funding program, which is called a merchant cash advance, businesses are provided with cash upfront in exchange for a percentage of its credit card sales in the future. A merchant cash advance might be a good option for businesses that have bad personal credit bur regular credit card sales on a monthly basis.
However, you need to be very choosy when selecting a merchant cash advance lender. Some providers might charge as much as 38%, with others being as low as 12%. Also, in terms of repayment, most merchant cash providers will take out a fixed percentage of your credit card receipts every day until the advance has been paid back. There are other cash advance providers that might offer a repayment method based on fixed monthly installment payments.
Sometimes a business owner can overcome their personal credit problems by taking on a business partner to be their credit partner in order to obtain lines of credit from business credit cards. The best place for you to look is for business partners who have high credit scores.
The credit partner does take on risk with this method since they are cosigning along with the business looking to get funding. However, it is very important to realize that this kind of unsecured business credit card won’t appear on the cosigner’s personal credit report unless they go in default.
Many Lending Options Out There
To answer the question of “Can I get a business loan with bad credit?” the truth is that yes, there are many different options when it comes to finding funding for your business even if your credit history is a little bit less than perfect. If you have poor credit, you will need to search harder for good terms and possibly even just to get a loan. That’s just the way it is.
Less conventional options
Peer to peer lending is generally seen as a place to find personal loans for poor credit, but the truth is that you have the option of getting that money for your business. Certain artistic/business endeavors might be able to take a shot at a crowdfunding campaign, and if you’re in an area that was hit by a natural disaster, you might qualify for a special SBA loan from the federal government.
Many other different kinds of funding programs are available that provide small business owners with the chance to get access to cash or business loans without needing great credit or having to subject themselves to annoying timelines, lengthy processes, complex paperwork or rigorous analysis that traditional business loans usually come with.
The struggle to find a good business loan can be a heavily personal one. These are harder to find funding for than a bad credit auto loan, where the vehicle naturally acts as collateral, or even for private student loans since lenders have government protection on those.?
Business loans for bad credit come in many different forms and it is worth seeing what your options are to make sure you get the funding you need not just to survive, but to grow and thrive.
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