Operating a small business is a huge task that comes with many responsibilities. Even in a thriving economy, there will be times when things get tight and money runs low.
Now imagine operating a business in an unstable economy and needing to access cash to keep your doors open.
It’s no secret that forty-eight percent of small businesses will be forced to shutter their doors within five years of their startup. But imagine being a business owner with less than perfect credit. This can really add to the stress.
Luckily, there are bad credit business loans to help individuals that can’t get funding from traditional lenders. These help people access the money they need when they need it, regardless of their credit score.
Keep reading to learn more about bad credit business loans.
What are Bad Credit Business Loans?
Having bad credit can make securing a loan difficult, but it is not impossible.
Bad credit business loans are typically loans issued by non-traditional lenders. This means the company or person lending the money does not have to adhere to stringent rules issued by the banking industry.
It is important to understand, in some instances, these types of loans will come with higher interest rates and shorter repayment terms.
Do You Really Have Bad Credit?
Sometimes people believe their credit is shot and they will never qualify for a loan. Just because you’re denied for a personal credit card, doesn’t mean you can’t qualify for other loans associated with your business.
It is important that business owners legitimize their businesses. This means filing for incorporation in your state, opening a business bank account, and keeping business records. Your accounting can easily be handled through an accounting software platform.
Credit is still important because most lenders will run your personal credit score when considering a business loan. Building a business credit score is done by properly managing your business affairs.
Pull your free annual credit reports from the major bureaus and start paying off outstanding debts and disputing inaccurate information. Some lenders will consider a credit score above 600 if everything else looks good.
What Types of Loans Can You Get?
So, you’ve exhausted all options. No traditional lender will help and you can’t qualify for federally approved small business loans. Don’t worry, there are still options.
Business loans with guaranteed approval are hard to come by when you have bad credit. It is easier to get approved for short-term loans that come in smaller amounts. Larger loan amounts mean the lender is taking a bigger risk.
Here is what to look for when you have bad credit and need a business loan.
Working Capital Loans
It takes months to get approved for a business loan through the SBA. The paperwork and the process itself can be overwhelming. With bad credit business loans online, the process is streamlined and borrowers get the money in days.
Hard Money Loans
Hard money loans are loans for business owners with bad credit. These loans are useful to borrowers in construction and house rehab businesses. The lenders are people looking to invest money and get a quick return.
To secure the loan, the property being built or rehabbed is used as collateral to secure the loan. Investors are more interested in your track record than your credit score. If they feel you are trust-worthy and the venture will reap a return, chances are you’ll get the loan.
Account Receivable Loans
Another popular bad credit business loan you can get online is account receivable loans. These are loans that are backed by your outstanding account receivables.
One reason a business has difficulties getting a grasp on their finances is due to customers who pay late.
In some industries, clients have up to 90 days to pay their invoices after the work has been performed and goods delivered. If a customer doesn’t pay on time it makes it difficult for small businesses to fund their next project.
If you can show a lender you have money outstanding from reliable customers, they will fund a loan based on those receipts. You’ll have to make payments regardless of when the client is due to pay, but it is an easy approval process.
Payday loans are not just for personal use. Business owners can also benefit from these loans that are available to help people make ends meet.
Consumer loans typically max out around $5,000 depending on state rules. If the lender has a separate product for business owners, the loan amount will be much higher.
With payday loans, the repayment period is usually a couple of weeks. The fee for a payday loan is around 10% but this number will climb quickly if you request additional time to repay the loan.
Business Credit Card Advance
Most credit cards have a cash advance feature attached. This is money you can borrow against your available balance on the card or an amount set by the card company.
If you have a business credit card, try paying off the balance each month. The card can come in handy if you ever need access to quick cash.
Family or Friend
Family and friends are another source of business loans for bad credit. Approach the people you know the same way you would a lending institution. Have all of your information in order, be professional, and be prepared to do a small presentation.
Show them how helping you will benefit them in the long run.
Get the Money You Need
Getting bad credit business loans is possible. You just need to know where to look and who to ask. Just remember these two important things: only borrow what you can afford to repay, and pay on time according to your agreement.
We are here to assist businesses in getting the money they need. Click here to quickly apply for up to $500,000 now!