If you are a small business owner with bad credit, you may have a difficult time acquiring a loan from traditional banks. Lenders are just not willing to take a risk on companies with bad credit scores, even if business owners have experience and run profitable organizations. The following are a few ways that business owners with not so stellar credit can get the critical capital they need to get started.
- Know What Is on Your Business’ Credit Report
There are business and personal credit scores. Although they are separate entities, lenders may look at both before deciding to offer funds. Get personal credit scores from Equifax, Dun & Bradstreet, or Experian. Check for any mistakes on the report. The good news is that credit scores can be improved over time.
- Cash flow Can Affect Loans
If your small business makes enough cash, it can obtain a small loan from a bank. The terms of the loan and interest rates may not be as favorable to your business as with low risk businesses (the worse your credit, the higher the interest rate). Plus the amount of collateral requested to secure the loan will most likely be high. Banks will judge your ability to pay by analyzing the past 3 years of your financial performance. If the business is less than 3 years old, the bank will require a solid business plan and projections.
- Merchant Cash Advances
MCA’s are a popular choice for merchants with bad credit. In this arrangement, merchant cash providers take a predetermined percentage of a merchant’s daily credit card receipt volume. Some merchant cash advance providers may also offer a fixed monthly installment plan to help merchants repay lenders.
- Getting a Co-signer
Another way to get business funding with bad credit is to acquire a partner willing to co-sign a loan. However, the personal credit of the co-signer will be considered before a lender will release funds. If you are late with payments, or default on the loan, the co-signer’s credit may also be affected.
Contact FAM if you are searching for business funding with bad credit. We specialize in giving merchant loans for small businesses. Our organization will help you reach your financial goals through short term loans and great rates. FAM can and will give advances to merchants with bad credit. Start your application today.