Don’t Let Bad Credit Stop You from Getting a Business Loan
A recent report showed that 63% of business owners seeking to fund their businesses will go to traditional banks. The success rate for being approved for these loan requests, however, were very low and only 27% were successful.
Business owners who are considered credit worthy will find it easy to access funds and this is a good thing because it leads to growth in the economy. It is, however, an uphill task for an entrepreneur with bad credit scores. The hard truth is that getting approved for a business loan by traditional banks is very difficult for small business.
Most banks and traditional lenders are quite reserved with their money and are constantly seeking ways to reduce the risk. No lender will want to give out their money to an individual or business they are not sure will repay their debt. They will focus more on the credit score because it is an integral part of analyzing the risk associated with a borrower.
Small businesses still need capital injections from time to time and this has created a lot of dilemma. Research shows that poor funding or lack of it is the main stumbling block for many startups’ growth and it’s a number one cause of business failure. A business will need additional cash to hire more employees, upgrade existing equipment, increase their marketing efforts and purchase more inventory. Failure to access funds for these business needs can be so frustrating to a business owner with bad credit.
So as a business owner, what are your other alternatives of getting funding? Well, there are several options that you can pursue to receive business funding. Other alternatives like credit card sales, credit partners, and bank deposits help you access funding. Other information can be taken into considerations and you can receive funding through these means regardless of your bad credit.
Below are some alternatives that can help you access bad credit business loans:
Credit card sales
This form of financing is also known as merchant cash advance. It’s ideal for business owners who are struggling with bad credit. Your business will receive cash advance when you need funding in exchange for a portion of future credit sales. You need to be selective because different lenders charge different rates. Some merchants will charge as high as 38% while others will charge as low as 12%.
Most merchant providers will offer a fixed payment schedule where they will take a daily payment of your credit card receipt until your advance is fully repaid. Others will charge a monthly installment as their repayment schedule.
Having a credit partner
If you are struggling with bad credit, consider having a credit partner who will help you access funding for your business. It is important to find someone who is also interested in your line of business. Your credit partner will help you obtain lines of credit in the form of business credit cards. The partner needs to have a good credit score to secure funding.
This method is risky to the credit partner because they are colluding with a business to get funding. The details will not appear on the credit reports of your partner unless they default.
You can get revenue based business loans if you are a business with regular bank deposits. A business is eligible for 10% of its annual gross deposits. It is based on your monthly deposits to your bank and you can access credit using this method regardless of your credit score.
The beauty of this line of credit is that you can get funding much faster. You also don’t need collateral and you can take as long as 18months to repay your loan.
Don’t be discouraged if you have bad credit. You can still get funding to grow your business using the above alternatives. Focusing on traditional banks only may limit your options and prove cumbersome due to the lengthy approval time and the huge paperwork that may slow down your operations.
Do you have bad credit? Not to worry. Get in touch today and let’s see how we can help