One of the most common questions among business owners is “can you get a small business loan with bad credit?” While many lenders don’t lend money to businesses with bad credit scores, there are options available for small business owners who need financing but don’t want their credit history held against them. We reveal four ways that small businesses can get funding, even when their credit rating doesn’t qualify them for traditional loans.
What is a Bad Credit Score?
A credit score is a three-digit number between 300 and 850 that represents the likelihood of you repaying a loan. Higher numbers indicate better credit and, therefore, improve your chances of getting approved for loans and other forms of financing. If your score falls below 570, however, it is considered “poor” and can make it difficult for you to qualify for bank loans or other types of traditional business financing.
How to Get a Small Business Loan with Bad Credit
When it comes to financing, there are multiple options for small business owners with bad credit.
1. Get an Unsecured Business Loan from an Online Lender
An unsecured business loan means you don’t need to put up collateral in order to get the loan. This means an unsecured loan is usually easier to qualify for than a secured one, especially when you obtain one from an online lender rather than your local bank.
Online lenders specialize in providing loans for businesses with bad credit, so they’re more likely to offer better rates and terms than banks. Online lenders can also provide a more streamlined application process than traditional lenders, so you could have your loan approved in as little as 24 hours.
2. Consider a Merchant Cash Advance
A merchant cash advance (MCA) is designed to help businesses that receive a large portion of their sales on credit, such as restaurants or retail stores. This type of finance allows small business owners to use their future credit card sales as collateral, not personal assets like their home or car. The business’s future card transactions, together with a fee the lender charges, are then used to repay the borrowed funds.
With an MCA, a business owner’s credit rating is a less important factor than their company’s credit card sales. This makes them a great option for businesses with high sales volume, rather than startups that don’t have enough momentum yet.
The application process is simple and fast, and the funds can be deposited into your business account as soon as the next working day.
3. Seek Crowdfunding
Crowdfunding is one of the fastest-growing methods of raising money for businesses, particularly in their early stages, because it allows investors to get involved without taking away any control or ownership. It’s also an option those with bad credit may need to consider, especially if they’re turned down by lenders.
There are many different crowdfunding platforms available, and they each have their own rules and restrictions. You’ll need to do some research to find the one that is best suited for your business model and goals.
4. Think About Equipment Financing
Equipment financing is a type of loan that allows you to lease an asset rather than purchase it. For example, if you need a truck to transport your goods, you can lease one instead of buying it outright. This type of financing is ideal for entrepreneurs who need to invest in equipment for their business, yet don’t have a high enough credit score to obtain the required funds.
Equipment leasing is also a great way to manage your budget. Rather than paying for the full price of the equipment upfront, you can pay a portion of its cost each month and then use it for as long as your lease lasts. Because the asset itself serves as security for the loan, your credit score is less of an important factor.
Need to Get a Business Loan with Bad Credit?
Without funding for equipment, inventory, and other expenses, you may find it difficult to grow your business beyond its initial stage. If you have bad credit and need a business loan, however, there are several options available to you. The first step is to assess your financial situation and determine if you’re eligible for any of these bad credit loans. If you are eligible, review your choices and choose the one that best fits your needs.
If you require an online business loan with a fast application process and outcome in less than 24 hours, Zinchcan help. Contact us at (714) 500-6622 to learn more about your options. You could qualify for up to $250,000 in just 24 hours.
