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6 Business Loans to Apply for When You Have Bad Credit

Scott Bilker Scott Bilker is the founder of DebtSmart.com and author of the best-selling books, Talk Your Way Out of Credit Card DebtCredit Card and Debt Management, and How to be more Credit Card and Debt Smart. Receive the 5-Year Loan Spreadsheet when you subscribe to his email newsletter.

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.

This entry was posted in Credit Cards, Debt Management. Bookmark the permalink. Read more articles by Scott Bilker. (Also see articles by all authors and articles in all categories.)

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