Posts tagged: small business loan bad credit

Small Business Loans with Bad Credit

Many small business owners find that attempting to acquire a business loan with bad credit can be rather difficult. After getting a start up loan a new business tends to lose money in the first year, causing late payments that slide down their credit rating. Searching for more loans for expansion and maintenance becomes a complicated task. Some entreprenuers are able to borrow from friends and family, but many do not have that luxury.

Bad credit can keep a small business from getting a loan from a major bank, but may not be such a hindrance when approaching a small loan company or a private lender. Funding amounts through one of these mediums may be somewhat limited, and a bad credit score tends to cause high interest rates, so anyone seeking a loan in this circumstance will need to plan accordingly and be prepared for these pitfalls.

Another alternative for the small business owner would be what is called a business cash advance. The requirements to be approved for one of these are not as strict as they are for a loan. When trying for a business cash advance, the applicant must be able to prove that it accepts credit card payments and meets a small minimum requirement for how much is processed in credit card sales each month. Repayments are done on an automated basis according to how you do business, and there is no collateral or personal guarantee required to obtain a cash advance. Similar to a payday loan for an individual, a small business with bad credit may find this to be the most feasible option when looking for a loan of sorts to make an expansion.It is important when running a small business to keep your personal credit score separate from your business credit score. Using the business’s tax ID number to acquire credit, often starting with a business credit card and using it responsibly, will allow a small business to be able to acquire a loan more easily even if the owner has a low score on their personal credit report.

Even with bad credit, there are a few loan options out there for a small business. The most important thing is thorough research and a careful comparison of the most likely alternatives. And, of course, responsible use of any new loan is vital to helping rebuild credit for a brighter future.