Various Options for Small Business Loans with Bad Credit

Posted by Sharib Mirza on July 21st, 2016

Though the lending for small businesses are reaching the highest point in the curve, still there are challenges that many small business owners with bad credits face. Many banks and financial institutions are still not ready to lend a loan for small business owners with really a bad credit rating. Though many companies have valid reasons for having a poor credit history, those are not still considered by the banks. For example, during recession time, especially in the year 2009-10, many small businesses failed to pay their vendors or faced problems in correcting their cash flow issues. The bad remark on any company may take years to get corrected. In the meanwhile, the company may require some kinds of loans. Luckily, there are many lenders other than banks who are ready to sanction small business loans even if the small business or the business owner has a bad credit score.

Funding Options for Small Business Loans with Bad Credit

There have been studies conducted which shows that only 25% of bank loans or credit card options have been sanctioned to small business owners. This means there are many other options available for business owners other than these, which is really a comforting fact for many.

Home Equity Loans

To start up a business and build a credit score on it would take months together. In the meanwhile, a small business entrepreneur can apply for a home equity loan if he or she owns a home. But while applying for such a small business loans, one must think about various risk factors involved in the business, as he or she is pledging the home.

Merchant Cash Advance

This is a very short-term loan which is approved to a business owner in a lump sum against the business's few future credit-card or debit-card sales. These loans are sanctioned for a short-term, generally for 24 months and the payments can be made in small installments, usually on each business day. These kinds of small business loans are not like regular bank loans where one needs to pay in lump sum every month and for a longer period of time. Many financial institutions which sanction such loans approve the loan application within 48 hours and the person applying needn't have excellent credit rates. The only drawback in such loans may be the high rate of interest.

Family and Friends

Seeking small business loans loans from family and friends is also a good option. According to statistics, about 50% of families and friends like the idea of small business and entrepreneurship, and come forward to help someone in the business. This is a very good option as no relatives or friends look into credit scores before giving a loan, as they believe in one's character.

Lending from Suppliers and Vendors

Many businesses thrive on one's vendors and suppliers. If the supplier is ready to supply products on credit and then report to the credit agency, then it is going to be a good option to improve the credit scoring. But the credit scoring will improve only if payment is done on time.

Business Credit Cards

Business credit cards help a businessman to improve his credit scoring and at the same time get finances to improve his business.

Microloans

Many non-profit organizations and online non-bankers lend microloans to entrepreneurs anywhere between 00 and ,000. These loans are specifically designed for women and minority entrepreneurs and also for companies who work for economic empowerment zone. These are really excellent for people with a low credit score, but with a higher rate of interest. But, compared to credit cards and other loans the rate of interest is nominal and affordable.

These are a few loan options for small businesses with bad credits, which may help one to either start a new business or develop an already existing business with confidence.

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