Getting
a bank loan when you have bad credit is an almost impossible feat. This is
because banks have tightened up their requirements for lending money to small
businesses due to the much higher desire to generate profit.
Banks
are more likely to insist on credit scores (both personal and business), which
gives some small entrepreneurs a bigger problem and a hard time. Some business
owners aren’t even aware what a credit score is!
Good
thing, banks are not the only loan solution. There are various types of funding
solutions that you can avail even if you have bad credit. These practical and
affordable choices do not require borrowers to have a good credit score; some
of these options do not even care if you have certain financial issues like a discharged
bankruptcy,
as long as you meet their minimum requirements.
1. Business Line of Credit
While
this is not really a business loan, per se. Business line of credit gives
business owners the benefit of getting funding access in an instant. Plus, the
interest rate is charged only to the borrowed amount and it doesn’t have that
much extra charges. The payment terms are flexible and lastly, it is a
revolving fund, which means you can borrow again what you have repaid. And with
this type of funding, you only pay for the money that you have used.
If
you need quick funds with flexible payment terms, then this if for you.
Business line of credit can be obtained even if you have bad credit. With this
funding source, you can pay for your business expenses like inventories,
upgrades, or even manpower.
2. Funding Through Accounts Receivable
Technically,
the accounts receivable financing is not a loan, but a cash advance on your
company’s pending receivable accounts. With this type of financing, you can
make sure to get paid as soon as you need it, plus, you won’t be liable to the
lender in case your client fails to pay the invoice on time or at all.
3. Small Business Loans
Small
business can avail working capital loans with straightforward funding options.
Payment terms can either be fixed or monthly. While this type of loan is easy
to obtain, it is not secured, and you won’t have to pledge your assets as
collateral. This type of loan is ideal for businesses with bad
credit, especially those who need immediate funding to cover their business
expenses.
Small
business lenders have looser requirements, and they usually offer terms that
are more flexible compared to bank financing. This is great news particularly
to small business owners as these lenders are more welcoming despite their financial
histories and credit scores.
4. Merchant Cash Advance
Like
accounts receivable financing, a merchant cash advance is technically not a
loan but an advance on payments for credit and debit card sales. This option is
only ideal for retail operations that accept cards as payment, such as hardware
stores, restaurants, retail boutiques, and others. With this type of financing,
a small percentage of the business’ daily sales will be deducted after each
operation, which will be applied to the merchant cash advance balance.
5. Equipment Financing
This type of loan is ideal for business needing to buy equipment to improve their business operation. The funds from equipment financing must be used to buy tools, technology, machines, equipment or service vehicles for the business. The payment terms are typically flexible, and the financed equipment will be your collateral.
6. Inventory Financing
Like
equipment financing, this type of loan enables you to pay for inventory or
materials needed to operate your business. This funding type is particularly
valuable to franchisees and resellers, or those who are obligated by their
contracts to have a minimum number of stocks at all times.
Summing
Up
A
business will only grow and develop if it has a stable source of capital. In
this complex world of business, having a bad credit should never make anything
else more complicated. Every business has its unique side and luckily, there
are business loans that will benefit them regardless of what kind of business
they are or what the credit score is.
With
the 6 alternative business loan offers above, you are assured to get the type
of financing you want and actually need. Not only that they are much easier to
achieve, they also have fewer risks compared to traditional business loans you
get from banks and big lenders.