Small Business Loans For Bad Credit Are Smart Investments

Running a small business is a demanding task; one has to keep up with the latest trends. Fortunately, with the advancement in the direct lending industry, small business owners have multiple small business loan options today—including term loans, lines of credit, equipment financing to invoice factoring. Merchant Advisors can help you determine the right financing solution for your small business. Fill our loan application form to get started and our loan specialists will handle the rest.

At Merchant Advisors, we offer complete freedom to our clients to use the money, as they please, for the fast and rapid growth of their businesses. We take care of your financial problems so you can have time to focus on what matters to you the most - your business.

How to Qualify for Small Business Loans for Bad Credit?

While evaluating borrower’s eligibility, three main factors go into the business loan qualification: credit score, time in business, and annual revenue.

Your Credit Score

Lenders take into account both business and personal credit score to determine borrower’s eligibility. A personal credit score is the most important factor in a small business loan application – influencing the most in getting the best loan deal. The higher your credit score is, the better will be your chances of obtaining affordable business funding.

Before you make a loan application, it's better to check your credit score by pulling out your credit report from top three credit bureaus to know exactly what lenders will be looking at. The credit score you’ll need to qualify for a small business loan is generally based on the loan you’re applying for.

Generally, direct lenders want you to have a credit score of 550 or more, but you can secure better business loan offers if your credit score is higher, preferably 620 or more.

Time in Business

Time in business is another important factor in your small business loan qualification. Lenders are unwilling to lend to new businesses. According to the Small Business Administration (SBA), approximately 80% of new businesses will survive the first year.

If your business is around for 2 or more years, it will improve your chances of securing business funding. Business owners with at least 2 years of time in business will have more business financing options, and might qualify for a bank loan or SBA loan.

For startups and new businesses, business credit cards are a great business funding option to secure startup business capital.

Annual Business Revenue

Your business annual revenue is also a crucial factor that lenders pay attention to when determining small business loans qualification.

By looking at how much money your business is generating, will help lenders determine the amount of money your business might qualify for. They want to know how much your business can afford in terms of monthly payments, rather than approving you for money more than your business is generating each month.

How to Apply for Small Business Loans for Bad Credit?

1 - Required Financial Documents

Applying for a small business loan can be an arduous process, based on the type of loan you are applying for. Every lender has its own set of requirements for approval and paperwork. To be on the safe side, have a look at the most important financial documents that might be required by the lenders:

Business Bank Statements

Before granting you a loan, every lender will ask for your business bank statement. Some might ask for 3 months of statements, while some for 6-12 months. So, be prepared to pull the bank statements the lender asks for.
Balance Sheet

Just like a medical report tells you about your physical health status, a balance sheet or “statements of financial position” depicts an owner’s financial health. Most lenders want to see an updated balance sheet for 60 days
Profit and Loss Statement(s)

Lenders also want to see your ‘P&L Statement' also known as ‘Income Statements’ to see your numbers from the last two fiscal years along with a company prepared Year-to-Date (YTD) version that has been updated within 60 days. Analyzing this will give direct lenders ideas regarding your cash flow management.
Business Debt Schedule

A Business Debt Schedule will help the direct lender to decide whether you are paying another debt at the same time or not. They want to know how you are dealing with your current debts and do you have the cash flow to meet existing debts.
Personal Tax Return

Your potential lender might ask for your personal tax return to verify your income. If you haven’t filed your taxes, it is best to file them before you make a business loan application.
Business Tax Return

Lenders also require you to provide them with your business tax returns documents from the last two fiscal years. They want this information to verify your revenue, among other things. To increase your chances of approval, you must have a tax return file ready, including the financially intact documents.

2 - Shop Around for Best Small Business Loan Offer

With so many small business loan options available, selecting the best loan offer can sometimes be frustrating. The key is to shop around for the best small business loan offer. And this means reviewing each loan’ option cost, term, and repayment structure.

Ask Lenders for the APR

Annual Percentage Rate (APR) is the loan cost including the interest rate and any other fees incurred to acquire the loan. While you’re wondering if you get the best loan deal, there are some hidden fees attached to it, making your loan deal not the most affordable business funding option. This is why you need to ask lenders for the APR—so you can compare small business loan options all-inclusive. The best way to calculate the APR is by using an APR calculator.
Understand Hidden Loan Fees

Apart from the APR, there are certain loan fees you need to watch out for while applying for small business loans:
- Origination Fee - Whenever you apply for a new loan, the lender will charge an origination fee.
- Application Fee - We believe you have comprehended the importance of credit score checks, and tax, and business documents’ assessments. Not all of that happens free; the lender has to pay an application fee.
- Guarantee Fee - You need to pay a Guarantee Fee when you're approved for an SBA Loan. The government lends these loans. The lenders, therefore, pay a set amount to the government.
- Late Payment Fee - The direct lender will charge you for late payments. You can't escape this sour fact. Set multiple reminders to make the payments on time.
- Pre-Payment Fee - If you want to avoid the burden of payments and debt, check in with your lender and avail the option of prepayment. Some direct lenders might charge a fee for it while others might let go of your remaining debt.
- Check Processing Fee - If you are making transactions via check, be mindful of the deductions. So, select the payment method that is more comfortable for you.
Choosing Your Small Business Loan for Poor Credit

Before choosing a small business loan offer, ask yourself these questions to understand which loan offers are right for your small business:
- Can you afford this loan?
- Are you comfortable with the repayment structure?
- Do you really get the lowest rate on the loan?
- Do you understand all the associated fees with the loan?

Small Business Loans for Bad Credit from Merchant Advisors

Unlike traditional lenders, Merchant Advisors provides personalized financing to businesses. We take the time to understand your business and financial challenges, and not just your credit profile. This helps our process easier to get you the customized business funding your business needs to grow and succeed.

Small business loans for bad credit from Merchant Advisors don’t require collateral or a down payment. Apply today and we’ll get you a personalized business financing solution that’s tailored to your small business needs without the hassle. Contact us now!