Having a bad credit history can regularly hinder business financing requests, particularly through the more traditional ways. If you see that your credit score is not that good, it can be an exasperating time, particularly if you are looking to expand your business, but don’t know where to go.
For most businesses, local bank are usually the first option to visit for a small business loan. However, traditional financial institutions will require a proof of repayment in order to acquire the funds. On top of it if you have a bad credit, getting a small business loan from traditional lenders can be a complicated process.
Most lenders take personal credit history the top factor when evaluating your small business loan application. According to FICO, bad credit range from 300 to 629 and the small business borrowers that fall under this range considered high-risk.
They also evaluate small business borrower’s business knowledge, provided collateral and equity in the business. If either your business experience or personal credit is blemished, a traditional lender will be reluctant to approve your small business loan request.
Alternative Funding Options for Bad Credit Borrowers
If you have problems with your credit in the past, it doesn’t mean that there is no funding options available for you. Although it is quite difficult to get the funding for bad credit business via traditional lenders, but alternative lenders can be a life savior. Whether you need funding for working capital, or looking to start a new project, bad credit small business loan from alternative lenders is the right solution for you.
Best Small Business Loans for Bad Credit Borrowers
Alternative lenders provide different types of business loan programs that are not provided by the banks and credit unions. If you are rejected from getting traditional bad credit business loan, you can give them a try. Here are some of the alternative business loans for bad credit borrowers;
- Small Business Loans
Small business loans are one of the major types of alternative business funding that can be used even having bad credit problems. They are simple to apply and easy to acquire. Small business loans are most preferred funding options by small business owners. They are normally used for purchasing inventory for busy season, equipment, paying employees, and expansion purposes. If you are looking to fund your next inventory purchase, a small business loan can help you.
- Unsecured Business Loans
Unsecured business loans are the type of small business loans where you can get funding for your business even if you don’t have nothing to pledge as collateral or bad credit issues. There is no collateral involved, that feature makes them the most preferred option for small businesses.
- Bad Credit Business Loans
Bad credit business loans are especially meant for business struggling with bad credit problems and can help businesses to boost their sales by offering you the required funding that you need even with bad credit. Not matter what your credit score is, you can acquire a bad credit business loan effortlessly. These bad credit business loans are particularly meant to help underprivileged bad credit businesses. The good thing about getting this type of bad credit funding is you don’t have to provide any sort of collateral. Additionally bad credit business loans help you to improve your credit score by making timely payments.
- Working Capital Loans
Small business that are experiencing some cash flow problems and their bad credit situation is preventing them to get funding to cover this problem, working capital loans can be the best solution for you. Working capital loans can help you to cover all your short term cash flow related issues even with bad credit.
- Business Lines Of Credit
Business lines of credit is a small business funding program and can also help businesses experiencing bad credit problems. Lines of credit can help businesses to draw a credit line against their receivables and use these lines to invest in business. These business lines of credit comes in short-term business line of credit and long-term lines of credit. Short term lines of credit are especially made to cover the short-term financial needs of small businesses. However long-term business lines of credit need to have a good credit score. With long term lines of credit, businesses can cover the inventory purchase, cash flow problems, and other operational expenses.
- Accounts Receivable Financing
If you invoice clients, you must understand the frustration of delayed payments. Luckily, invoice factoring or accounts receivable financing is the best solution for that problem. Accounts receivable financing helps businesses by providing the funding. You need to simply sell your unpaid invoices to the lender. The influx of cash helps business owners to meet the payroll, expand their business, and pay business related bills on time.
- Merchant Cash Advance
A merchant cash advance (MCA) is a perfect funding solution for small businesses that are in need of immediate funding. The best part of merchant cash advance is that you only pay advance cash in exchange of a specific percentage of your daily credit card sales. The downside of merchant cash advance is that it’s an expensive option for bad credit borrowers because of high interest rate, though quick in nature.