Applying For A Business Loan With Bad Credit
Many times as business owners, we run into a situation where we need a business loan, while having low credit. There are however multiple options for business capital with loan instruments designed for business loans for bad credit.
Business Loans For Bad Credit
When applying for business loans with bad credit, we can assume a FICO score under 620. Although having a FICO score of under 620 does limit the funding options a business owner can borrow, opportunities for business loans for bad credit do exist. This includes shorter term loans as well as other financing options like receivable financing and equipment financing at higher rates.
Business Loans For Bad Credit Options
Short-term loans, or loans having a maximum repayment period of less than a year is one option for business loans for bad credit. Short-term lines of credit are another option for business loans with bad credit, which can provide your business with access to capital quickly and on the fly. Lastly, merchant cash advances are another solution for business loans with bad credit, which are a purchase of the business’s future receivables (credit and debit). You will notice that all of these options are for short-term borrowing. This is because longer-term loans put more risk on the lender, and with a low credit score, short-term funding is the primary option for business loans with bad credit..
Tips For Business Loans With Bad Credit
Although APR for short-term capital is much higher (40%-70% on average), as you build your relationship with a lender and pay off the short-term loans, you will be improving your credit score as well as proving to the lender that you are less of a risk. Successfully paying off business loans with bad credit, you will be able to borrow capital down the road at more favorable annual percentage rates.
We have compiled a list of lenders with financing options for business loans with bad credit. Each lender works with you to provide your business with the best possible options for capital.
It can be difficult for business owners to get business loans with bad credit. This is especially true when dealing with traditional banks, who stick to the owner’s FICO score as the main element of accreditation for the needed capital. However, business loans with bad credit can be attained by dealing with direct lenders, who are able to look at more than just credit scores. Many loans with direct lenders are unsecured as well, meaning business owners do not have to risk their collateral in the chance of default. Business loans for bad credit through direct lenders are usually shorter term loans, which are under a year in length.