How to Get a Small Business Loan, Even when your Credit is Bad
Any small business owner with a great idea usually needs capital in order to get their business up and running. Unfortunately, it can be difficult for those with bad credit to get a small business loan.
According to a recent SBA.gov report, nearly 63% of small business owners who were looking for funding showed up at a traditional bank with a loan application. While many people would think of a bank as the first place to go, it’s important to remember that the rest of the study mentioned that only 27% of those seeking a loan were approved through a traditional bank.
Those numbers can seem disheartening if you are a small business owner looking for a loan, especially if you have bad credit. Remember, however, that while a bank may be the first place you think to go in order to get a loan, it’s not the only place. In fact, it may not even be the best place. Here are some other ways to get funding.
1. Bad Credit Business Loan — If you are looking for capital, you may consider getting a bad credit business loan from a company that evaluates and dishes out loans based on both the income and growth potential of your business, rather than on your credit report, tax return, and profit and loss statements. It’s much easier to get funding from a company that understand people can get in a tough spot, but still has the potential to grow financially, than to sit around and wait for a bank to help.
2. Revenue based loans — Another way to qualify for a loan is to set up a business bank account, and make monthly deposits. Usually, a business can get a business loan that is at least equal to ten percent of the gross deposit amount. This number is solely based on the money going into your account, and the loan amount is not determined by credit. This is a great option if you are looking for funding in a hurry. It generally only takes 6-7 days for this type of loan application to be accepted, processed, and approved. This is a great way to get cash fast. Borrowers should keep in mind that while this is a great way to get cash, interest rates will typically be much higher than a traditional bank loan.
3. Merchant Cash Advance — If you are desperate for cash, and don’t have good credit to apply for a business loan, then you may want to consider a merchant cash advance. A merchant cash advance is kind of like an investment deal. In this deal, a company will provide you with a sum of cash in return for a portion of future credit card sales. If you are a business owner that needs capital right away, and has a promising future of credit card sales, this may be a win-win scenario for both parties involved.
If you opt for this type of financial deal, remember to shop around. There are companies that will ask for a small percentage, and companies that will ask for a large percentage. It’s worth it to do your homework, and select the company that is asking for the lowest amount in return. You only want to continue to shell out a high percentage of all of your credit card sales until the amount you borrowed is paid off in full.
4. Special Loan Programs – Did you know that certain companies provide special loans for minority groups? For example, some companies provide Small business loans for women that have their own business. This means that even if you are a woman with poor credit, companies want to see you succeed. As such, they offer loans to help you get your idea off the ground and rolling. These types of loans are for people with good credit and bad credit. They are simply more convenient, because not a lot of paperwork is required in order to get approval of the loan. This is a very good option and very helpful for women who own and operate their own business. Look for these types of loans for other minority groups as well. You never know what type of benefits you will find.
5. Get a business partner – In some instances, especially if you are not interested in paying higher interest rates, the best option is to find a business partner that has excellent credit to help apply for the loans. If you co-sign, and stick to making the payments, then it will both give you a better interest rate, and raise your credit score in the meantime, which will help you qualify for better loans in the future. If you have someone you trust to help you with your business, this is a viable and smart option.