Posts tagged: small business loans for people with 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.

Bad Credit Business Loans

I’ve heard plenty of people say the biggest mistake you could make in starting a business is to go in under funded, and I’d have to say I agree with the sentiment. Most new entrepreneurs’ biggest fear is to start a business and have it go poorly. What they don’t realize is that in many businesses, success (in the form of sales) can be just as dangerous to the business as failure if there isn’t enough cash in the bank. Loans are a great way to get that cash in the bank, but if your credit is no good your only option may be bad credit business loans.

Take for example a manufacturing business. Let’s say the business produces some kind of trailers, and it’s just gotten off the ground. Suddenly, orders start poring in. Great, right? Not necessarily. If the business doesn’t have enough cash to keep up with demand, you’ll quickly upset the customers, harpoon your momentum, and then you’re left standing with what could have been a great business. Your only chance would be to get a business loan with bad credit to float you until your sales receipts put enough money in the bank to keep up with demand.

Now, the good news is you’ll find it easier to get a loan from a bank, independent of your credit status, if you already have a functioning business with some history of sales. Bankers’ wallets start to loosen up drastically once they can see an income statement that has any ink on it at all (turns out bankers are rarely interest in pretending to be venture capitalists).

If yo haven’t started making sales yet, getting a bad credit business loan will be just this side of impossible. I hate to say it so bluntly, but banks don’t like risk, and there aren’t many things more risky than a new business being run by an entrepreneur who doesn’t have a clear sense of what his costs are, or what his cash flow is likely to look like on a consistent basis.

So, if you have bad credit, but a good business idea, I’d start talking to every friend and family with some liquidity and an entrepreneurial spirit. I know no one wants to be ‘that guy,’ but if you really believe in your business you have to be ready to go through some awkward social moments to get the thing off the ground and steaming toward its potential.

Hang in there – if your idea is truly sound the money you need will find it’s way to you!