Tips On How to Get a Small Business Loan With Bad Credit

You are more than your credit score. Unfortunately, when it comes to obtaining a small business loan, many conventional lenders do not look beyond those all-important three digits. It is very common for a small business owner to have less than perfect credit, but own a business that they can be proud of, or have a business idea that would hit the ground running with the right support.

The trick is finding a small business loan that does not focus on your credit history. You are not alone in your quest for that ideal lender that looks at your overall business potential and sees you, not a number.

According to foxbusiness.com, if you have bad credit and a bank has turned you down for a loan, it doesn’t mean you can’t get the financing you need. There are alternatives that have been created to assist the small business owner facing today’s challenges. It is time to leave the intimidating bank criteria behind and find a lender who sees you and what you have built and has a loan product designed to fit your needs.

What Are Some Alternatives?

According to entrepreneur.com, your best bet is to find a method to fund your business in a way that actually will help your score get back on track. In other words, find a loan that limits your risks and offers flexibility in the repayment schedule, so you will always be able to make your payments. The result will be that when you’re ready to move your business to the next stage, your score will have improved and will start opening doors for you. Options include:

 

Crowd Funding

There are websites that allow start-up businesses to pool small investments from a number of investors instead of forcing companies to look for a single investment.

Pros

  • Websites like Kickstarter are a way to set up an account and ask for investor support. This works well if you can reward investors with product or services, or if your business is simply going to be a cultural asset to the community.

Cons

  • Expect challenges because getting the funding you seek requires a lot of marketing and promoting of your “campaign” for funding.
  • Your credit score does not matter, but your skill in garnering public support does.

 

Credit Cards

There are small business credit cards available to those with poor credit. This allows you some financing, usually with limited funds, to apply to your business needs.

Pros

  • It can be a fast funding option if you need cash quickly.

Cons

  • Your interest rate will be based on your credit score and will probably be pretty high.
  • You credit line will most likely be limited and may not be enough.
  • Your monthly payment amount may be unknown until you get that first bill. So if your business hits a slow period and you can’t make your payments, it negatively affects your credit score even further.

 

How to Get a Small Business Loan With Bad Credit From Alternative Lenders

Alternative lenders offer options when it comes to getting a small business loan with bad credit. These lenders tend to base their approval on what actually matters, the overall health of your business and its potential. Alternative funding solutions are ideal for entrepreneurial businesses and for those in a credit crunch: these options provide a way to fund an opportunity for business growth, quickly and with greater ease. What used to take several weeks or even a few months of waiting can now be done online in a couple of days.

Pros

  • The process moves quickly. Alternative lenders don’t make you wait 30-90 days for your money. They offer fast solutions, so you can get the needed cash in hand quickly.
  • Solutions are real. Alternative lenders look at what you have built not your credit history, so even with bad credit you have options.
  • Applying is easy. These options strip away the intimidation and lengthy documentation requirements. The application is simple and straightforward and the terms and repayment of the loan can be customized to fit your sales volume and the best desired time-frame for your business. Your success is part of the equation.
  • Start-ups are welcome. Even if your business is new, this type of funding trusts in your ability to take this business and make it a success.

Cons

  • Slightly higher interest rates than a bank, but you get approval on a loan that fits your needs.

 

Lines of Credit

Similar to credit cards, but with lower interest rates, lines of credit are typically unsecured so they don’t require collateral and long repayment time-frames. According to businessweek.com, lines of credit are based, not on your credit score, but on a percentage of the value of your business (assets, inventory and accounts receivable).

Pros

  • With a Business Line of Credit you only borrow exactly what you need and your interest is based upon the amount used, not the full amount available.

Cons

  • Interest rates may be slightly higher than other methods.
Conclusion

There are alternative business funding solutions to help your small business succeed, even if bad credit is a concern. To learn more about creative business loan options, contact Credibly today!


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