For many traders, bad credit is nearly impossible to avoid. Because a business relies on customer revenue, its loans and bills are rarely paid on time. And although the lenders and billing companies often give the merchant a few more days before branding it a late payment and invoking additional fees, credit reporting agencies usually update your credit file the minute you extend your stay with a loan or bill.
That said, a merchant can’t afford to get frustrated when their credit score makes it hard to acquire funding. The best option is to look for alternative ways of raising the money, especially those that will help increase your score rather than bring it down further.
Below are a few ideas you can implement to fund your business if you have bad credit
Nonbank lenders can offer you small amounts, regardless of your credit score. Microloans usually get to a maximum of $25,000, with short payment periods. Some lenders will even make reports to your credit bureau to raise your score if you make payments on time, which means your credit line will be back on track after several repayments.
Microloans for borrowers with low scores usually attract high interests. When shopping for one, do your homework and compare rates to ensure you get the best deal.
MCAs, or Merchant Cash Advances, are an excellent alternative to your average bank loan. However, traders with poor credit can find them hard to come by if they don’t know where to look.
It’s good practice to filter your options to only the companies that offer credit card funding to individuals with low credit scores. First American Merchant, for example, has a high approval rate for bad credit applicants.
The good thing about cash advances is you pay back with a percentage of your credit card sales and not a lump sum amount at the end of every month. This way, you can concentrate on growing your business, and if you make a habit of competing advance repayment promptly, your credit score will eventually fix itself.
- “Free” help
If you need to minimize debt, you can focus on getting “free” funding in the form of grants and gifts. Getting funded in this way will depend on your business, but it generally won’t be easy. Be wary of internet brokers who claim to have a link to government grant programs, and do enough research to identify the best opportunities available.
Alternatively, you could reach out to family and friends for support, which can be handouts, free services or little to no interest loans.
Getting your business funded when you have bad credit is no walk in the park. Nonetheless, it shouldn’t be enough reason to abandon your dream. Make use of the tips above, and you’ll raise the capital you need.