Applying for a loan can be challenging, especially for those who have bad credit. However, there are still plenty of ways to secure business loans for bad credit.
There are lenders that specialize in providing business owners with poor credit with loans. They are called sub prime lenders and the loans they provide have an easy approval process. So, even business owners with poor credit can be approved.
For starters, you can look into these five business loan funds that are best suited to your financing needs.
Short-term loans are the best option for those unsure about having prolonged financial obligations. Like your regular loan, the lender expects you to pay the initial deposit plus interest within an agreed-upon period.
The usual repayment schedule for these loans is much shorter than the conventional loan since a short-term loan just serves as an immediate assistance to the borrower.
Along with this, lenders of these types could offer good repayment alternatives that will work best for your business. So if you are starting small—or with nothing all—this could be an excellent introduction to alternative funding.
Short-term Business Line of Credit
For this type of loan, you will be able to access a certain amount of money on a continuous basis, yet for a shorter amount of time. The short-term business line of credit operates similarly to a credit card in which you will only repay what you have used; thus, interest is charged on what you use.
The good thing is, these loans grant you funding despite your low credit score and/or having a bad credit. Many would say that business lines of credit are great a start for those who are in the journey of building their credit score. These kinds of lines of credit could help you manage your cash, and build not just your personal credit, but if done correctly can help you build your business credit.
Working Capital Loans
If you are searching for a loan that can provide financing for your day-to-day operations without worrying about your poor credit, working capital loans are the way to go. These loans are ideal for your everyday funding. Sales will not always be as high, and sometimes you just need a certain amount of cash readily available for you.
These loans are usually based on something like your account receivables, inventory or equipment you own. These act as collateral for the loan, so your credit isn’t a big factor. In fact, for accounts receivable financing, they don’t use your credit as part of the approval process!
Repayment for A/R financing is done by the lender who collects the money from your clients. As for inventory financing and loans based on equipment. The repayment is done monthly.
These financing options are open to new (startups) and well established businesses.
Merchant Cash Advance
A merchant cash advance serves as a quick fix for your capital needs. These loans should be obtained only if you have a clear idea of how they will be repaid. They have a relatively high-interest rate. But they can be obtained usually within a day of applying.
They also have an easy approval process. They base approval on the average amount of credit card transactions you do monthly.
You can use equipment financing when you need financing for equipment. Equipment financing has flexible credit requirements and is open for all types of businesses including start-ups. If you have bad credit you can always have a co-signer or provide additional collateral to get approved. If you don’t have a co-signer some equipment lenders will allow for a large security deposit.
Equipment financing can ONLY be used to purchase equipment. Most lenders will ask you for an application, 3 months business bank statements or 3 months personal bank statements if you are a startup and an invoice for the equipment you want to purchase.
I hope this post has helped you in some ways about business financing and how you can get business loans for bad credit.
Liz Roberts has been in the business financing industry for 22+ years. She got her start in banking, went on to consumer and commercial collections and then onward to becoming a senior credit analyst for several small leasing companies. She has also been a freelance writer for 15 years and has written about business and consumer financing on several blogs. She also maintains a low carb living blog.