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Thursday, December 3, 2015

Can you get a small business loan with bad credit?

Bad credit business loans
Business loans enable commercial opportunities
Getting a loan – whether it’s a personal loan, a mortgage or a business loan – can be a challenge if you have credit that is less than stellar. Lenders want to know that you have the resources to pay back the funds. Whatever the reason, having bad credit makes you a higher risk in the eyes of a lender. However, there are ways to get a business loan even if you do have a few skeletons in your financial closet. You could take the time to build up your credit score and then apply for a small business loan from a lender like Lendified, but that can take time – sometimes years. Instead, try one of these solutions.

Home equity loans

If you own a home, you can apply for a home equity loan for your business. This is a risky solution, however, because if your business goes under and you are unable to pay back your loan, you are at risk of losing your home as well.

Cash advance

In some cases, it may be possible to get what is known as a “merchant cash advance.” In this scenario, a business owner is approved for a loan of a lump sum, which is a loan against the business’ future credit card or debit card sales. These are almost always short-term loans, usually with a repayment term of no more than 24 months. The benefit is that these loans can be repaid in very small installments, generally at the end of each business day once the sales are calculated. Because they are paid back daily, these loans are often given to those with bad credit and the approval process is usually pretty short. The downside of these loans is that the interest rate is usually quite high.

Private loan

It may be possible to get the loan you need from family and friends. If you are lucky enough to be able to secure funds from a family member or a friend, this can be a good option for those with bad credit because your credit score won’t come into play in the loan. They will loan you the money based on trust and their knowledge of your character, nothing more. That’s the easiest approval process ever!

Vendor loans

In some cases, you can get your vendors to supply products to you on credit. This is not only a great way to get the supplies you need without having to pay up front, but if the vendor then reports to a credit agency that they have extended credit to you and you have successfully paid it back, that will bolster your credit score moving forward. Of course, this scenario hinges on your ability to pay back the loan on time.

Credit card

If you have a business credit card, this can be a great way to get the supplies you need immediately. It’s like a reserve of cash that you can use when you need it. But, as with all credit spending, it’s important to know that you must make regular, on-time payments. This may not be a great option for you if your credit problems stem from an inability to manage credit card debt in the first place.

A micro-loan

It can be possible to secure what is known as a micro-loan from a non-profit organization. These organizations sometimes have funds in place to help start-up entrepreneurs get off their feet, particularly minority groups such as women and ethnic minorities. These are generally smaller loans with higher interest rates, but the interest rate is generally lower than those charged by credit cards and other types of loans.