The financial crisis the economy experienced several years ago has caused many business owners to suffer from bad credit. It is a fact that smaller businesses struggle the most in securing funding from a traditional bank. While recent news has suggested that it will be getting easier for businesses to obtain funding from traditional sources, having bad credit is still a big issue.
Gaining access to capital is the biggest roadblock for entrepreneurs as they struggle to grow their businesses. Even businesses with stellar credit ratings can struggle. Without the funding it needs, businesses are unable to purchase additional inventory, hire new employees or buy/upgrade equipment.
So what can a business do to keep their bad credit from stopping them from experiencing growth? How can a business with a bad credit history obtain the funding that it needs when traditional funding options are not available to them?
Fortunately, there are alternative funding programs and solutions that are both safe and efficient. These options allow a business to obtain a business loan or line of credit, regardless of having bad personal credit. Instead of examining the individual’s personal credit, other factors are considered; such as, bank deposit history, credit card sales, credit partners, etc.
Revenue-based loans. This program is based on the deposits that go into a business’ bank account on a monthly basis; thus, if a business has regular bank deposits, it should be able to obtain a revenue-based loan. Regardless of bad credit, the loan amount will be equal to 10% of its annual gross deposits.
Business credit cards. A business can obtain credit in the form of business credit cards if they have a business partner(s) willing to also be a credit partner; this partner should preferably have a strong credit score. Keep in mind that this method does bring some risk to the credit partner, since they are cosigning with the business to help secure funding.
Merchant cash advance. Merchant cash advances continue to increase in popularity. The advantage of a merchant cash advance is that it provides a business with upfront cash. This cash is given with an agreement that the provider will receive a portion of future credit card sales. This is a great option for businesses that have monthly credit cards sales but struggle with bad personal credit.
With 1st American Merchant Funding, for example, a business can receive funding even if their credit score is below 500. The application process is simple, and the programs are extremely flexible. Unlike small business loans that require extensive documentation and complicated contracts, a merchant cash advance does not require tax returns or financials. The high approval rate and revenue based collections make bad credit merchant cash advances a very appealing option for businesses.