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Small Business Loans For Bad Credit
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Getting approved for a business loan is certainly a challenge for businesses with bad credit. Most banks require a credit score of at least 650, and small businesses are feeling the pain. Entrepreneurs often discover that, while their initial business loan allows them to establish a business, maintaining and expanding the business requires extra funding.
If you need cash to help your business continue to grow, or you need more working capital, there are options to overcome your funding challenges and small business loans for bad credit are available. Here are some ideas.
Look Beyond Bank Loans and Credit Cards
Did you know bank financing and credit cards make up only 25% of the total funding needs of a young business? That means 75% of the cash you need can come from other funding options that aren't so dependent on your credit. Credit cards and bank lending designed for business owners will bad credit often comes with a much higher interest rate.
Look for Microlenders and Online Lenders
If you're searching for small business loans you can qualify for, a great resource is the Internet. There are many online non-bank lenders who provide microloans to entrepreneurs and small business owners, usually ranging from $5,000 to $25,000. These lenders can be a great source of capital if you have bad credit and most will also report your payments to the credit bureaus, allowing you to improve your credit in the process.
If you have poor credit, these small business loans may have high interest rates. If you're already used to paying credit card interest rates, these rates will not be shocking to you, but remember that some installment loan agreements may prevent you from making partial payments.
There are also subsidized microlenders in many states who provide flexible loan terms. You'll get a better interest rate on these start up business loans, although they are more of a challenge to find.
Consider a Business Cash Advance
Business cash advances are an excellent option if you're looking for business loans with bad credit. Cash advances usually include flexible repayment options, fast approval, no credit check and no collateral necessary. Merchant cash advances usually don't require any financial figures, either, but your business must currently accept credit cards to qualify. This type of business loan relies on your business's ability to continue bringing in customers and its based on your past business. The money may be used to increase working capital, pay employees, generate new business or buy inventory.
Cash Flow Financing
If you need business loans with bad credit, consider looking for lenders who provide cash flow financing. Rather than using your credit, this type of loan looks at your typical cash flow to give you the cash you need to expand your business.
Purchase Order Financing
Finally, if you already have customers with work orders, but you need the money to finish the job, purchase order financing, or just factoring, will provide up to 100% of the money you need. When the job is completed, you will get paid by your customer and then pay back the loan, keeping your profits. Many companies who provide factoring will even take over your invoices, paying you half up-front and the rest when they receive payment from your customer.
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