How to Get a Small Business Loan With Bad Credit

In order to be approved for a small business loan, the majority of conventional lenders will want to be sure that you are able to repay the money by providing information like your credit history, collateral, equity investment, and business management experience.

But what if you have bad credit? Can you still get approved for a small business loan that you need to establish your business? Yes, you can.

Getting a Small Business Loan With Bad Credit?

The first thing you should do is boost your chances of getting approved for a loan in the first place. Come up with a comprehensive business plan that shows a positive cash flow within your business. If your business looks viable and is based on an innovative idea, more lenders will be willing to consider lending you money.

At the same time, take some steps to improve your creditworthiness to boost the chances of getting approved for a loan. Request your credit report and scan it for accuracy. Systematically eliminate factors on your report that are bringing your credit score down, including hard inquiries, credit use, and late payments.

Once you’ve put your best foot forward, you’re ready to take the steps to apply for a small business loan with bad credit.

Turn to Alternative Lenders

But instead of looking to conventional lenders, like banks, consider using alternative lenders as your source of small business loans. Lenders such as these offer a number of advantages over banks, such as a quick and easy application process with approved money funded electronically within a matter of a couple of days.

The whole process is convenient and confidential. You can apply online from the comfort of your home safely and securely, and you won’t have to deal with anyone in person as you would when dealing with a bank.

What Options Small Business Financing Options Are Available?

There are a variety of small business loans that you can apply for, even if your credit score is less than par:

Short-Term Business Loan

Like a traditional term loan, a lender will loan you a certain amount of money which you agree to pay back – along with the lender’s fees – by a specified date. Unlike a term loan, however, short-term loans are usually for smaller amounts of money, and usually need to be paid back in a much shorter time frame. In addition, the payments are usually made much more frequently compared to traditional term loans.

These types of loans are great for short-term capital needs. You can get quick access to money with limited paperwork involved. Since the debt is on the books for a short time period, it shouldn’t affect your credit score for long. Keep in mind that some collateral may be required, and the loan rates could be high.

Invoice Financing

Rather than waiting around to collect on your receivables after your suppliers and customers have been invoiced, you can apply for invoice financing which will give you the funds you need to bridge these gaps. With invoice financing, you essentially sell your invoices to a lender, after which they provide you with 85 percent of the funds up front. The remaining 15 percent is kept in a reserve fund from which the lender collects their fees. Once the invoices have been paid, the remainder of what’s in the reserve fund is paid to you.

With invoice financing, you have the advantage of gaining fast access to cash, and the invoices serve as collateral. Not only that, but bad credit is usually not a deterrent from getting approved for this type of funding. It should be noted, however, that you may be charged higher fees compared to traditional financing.

Business line of Credit

Much like a credit card, a business line of credit gives you access to a certain amount of money in an account from which you can withdraw funds as you need them. As long as you don’t go over the credit limit, you can withdraw as much as you like, as often as needed. You only pay interest on the money that is taken out of the account. After you pay back the money withdrawn, you can use it again and again.

Aside from only paying interest on the portion withdrawn, other advantages of a line of credit include the freedom to use the money for a wide range of business purposes, as well as the chance to rebuild your credit score. Keep in mind that this type of financing may require collateral, and may come attached with higher interest rates.

Bad Credit? No Problem – Let Credibly Help

At Credibly, we work with a number of small business owners with all sorts of financial backgrounds. We can help you identify which types of small business funding solutions are best suited for you in order to help you grow and establish a profitable company.

To learn more about what business funding solutions are available to you, contact Credibly today or fill out our online pre-qualification request form.