4 Options to Get Small Business Loans for Bad Credit
Author: Stam Bett
In the past, getting a business loan was easy if you had a good relationship with your bank. Times are very different, though, and banks have become unwilling to lend to businesses if the owner's personal credit score is less than 700. Unfortunately, this describes millions of small business owners who, despite having bad credit, have profitable businesses with steady cash flow.
Have you ever wondered why banks are unwilling to look past credit at your actual business and offer small business loans for bad credit? While banks may refuse to extend you a loan, there are still options for bad credit business loans that give you the working capital you need.
Business Credit Cards
If your business has its own credit established and you have an EIN, you can apply for business credit cards as an alternative to bad credit business loans. These credit cards will help your business establish and build its own credit to qualify for loans later on, and these credit lines can help you make smaller purchases.
Business Cash Advance
This is an actual loan, not a credit card, and it's one of the most popular types of small business loans for bad credit. If your business accepts credit cards already, you can qualify based on the ability of your business to continue doing what it does best: getting customers to buy your goods or services. Based on your past business, not your credit, you will receive a cash advance that can be used to buy inventory, increase your working capital, hire or pay employees, generate new business and more.
Repayment for these bad credit business loans is based on your future cash flow from customers who pay by credit card, so these lenders won't worry about your credit score at all. Instead, they will want to make sure your business can keep your paying customers coming in.
Purchase Order Financing
These small business loans with bad credit are available if you already have a customer with a job order, but you need cash to buy supplies to complete the job. Factor the job, or purchase, for up to 100% of the cash you need and, once the job is finished, you get paid by your customer and then you pay back your loan and keep your profits. This type of loan is based not on credit but your ability to win over business.
Accounts Receivable Factoring
These bad credit business loans go by many names, including invoice factoring. Basically, your business will write an invoice for goods that have been shipped or delivered. You know it may take anywhere from 10-60 days to actually get paid. To fill this gap, you can factor these invoices and get the money today to keep your business running, finish another job, pay employees or buy inventory.
Because your business is merely awaiting payment from a customer, lenders will not look at your credit history for this type of loan. Their only focus is on the customer paying you so, assuming your customer has a promise to pay as agreed, this type of loan is almost always approved without ever checking your credit.
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