Becoming the owner of a new business, actually, can be pretty thrilling. However, it’s intimidating, particularly when you have bad credit problems. Bad credit score now affects not just the capacity to apply for credit but also affects your job application, insurance payment, and much more. The good thing is there are some options available in case of small business. There are business loan options available for small business owners that have bad credit issues. In the current financial industry, various business lenders offer financing options for bad credit borrowers.
Merchant Cash Advance
The best alternative financing option for small businesses is a merchant cash advance. Merchant cash advance is a lump sum amount offered to small businesses in exchange of a small percentage of their future credit card sales. Merchant cash advance also called business cash advance is the best possible funding solution for poor credit applicants to get cash for immediate business financial needs. There are no fixed payments; lender will receive an established percentage from your future sales.
Business Equipment Financing
Another business loan option for bad credit applicant is is collateral-based financing in form of business equipment leasing. By leasing business equipment, businesses not only have to pay less for the equipment bit also gain important tax deductions as well. There are many business loan lenders that offer equipment leasing regardless of the fact that they have bad personal credit or poor business performance. But the same financing option entails collateral requirement which equipment leasing lenders take in form of other equipment or property.
Accounts Receivable Financing (A/R Financing)
Another business loan option for bad credit borrowers is accounts receivable financing or A/R financing. This financing option permits a small business to get a business loan which is to be repaid by accounts receivable payments along with a premium amount. A/R financing helps in accelerating business cash flow, improve debtor collections, and control bad debts. The two most commonly use A/R Financing are Factoring and Invoice Discounting.
Starting a new business or supporting an established one requires necessary funds and it can be challenging for small businesses with bad credit. Looking for alternative business financing options can help bad credit businesses to overcome financing hindrances by securing a loan for business. However, lenders will usually require some guarantee or collateral and may charge higher interest rate or fee; still these alternative loan options are feasible for small businesses that have bad credit ratings. These business loan options provide a much needed solution to small businesses struggling with bad credit problems.