Your credit score determines a lot for your business. A high score means smoother sailing, since a good score will provide a wide variety of funding sources. If you’ve been unfortunate to experience a low score, however, you will not have so many sources to choose from.
Unfortunately, a low score cannot be simply and quickly wiped away from the “chalkboard”. It is there to stay. It can be changed, but it is going to take some time. If you do some searching, you can actually find ways to fund your business and get your score back on track at the same time.
- Seek New Means of Financing. According to an article by Asheesh Advani of Entrepreneur, “Studies show that credit card and bank financing account for just 25 percent of the total funding needs of early-stage entrepreneurs”. That being said, 75 percent of your funding can come from sources who are not so set on your current credit rating.
Be wary of credit card and lending programs. While these options are designed for those who have bad credit, they charge higher interest rates to compensate for the risk involved. Another option, via a bank, is a home equity line of credit. Again, this is a very risky option since you are putting your home on the line.
- 2. Web-based and Microlenders. Microlenders and web-based lenders are becoming an increasingly used option for those who have poor credit. Loans are typically in the $5,000 to $25,000 range. This can be a good option for you not just because of the source of funds, but also because your payments will be reported to credit bureaus; thus, helping you build your credit score. Just be sure to make timely payments!
Keep in mind that, while the rates for these options may seem affordable, payments on credit card debt can be made in partial payments whereas installment loan agreements may be more restricting. In addition, if your credit score is extremely poor, the interest rate for these loans will most likely be high.
- 3. Business Cash Advance. A business cash advance with 1st American Merchant Funding means you will have funding from your merchant account with flexible payback and fast approvals. Unlike a small business loan, there are no strict requirements, long wait times for funding, complicated contracts or extensive documentation. In addition, it is a great option for those with poor credit since credit scores below 500 are considered and approved. The payback programs are both simple and flexible.
Don’t let bad credit slow down your entrepreneurial vision and goals. There are options out there that are not only convenient for you, but will also help you build your credit back over time.