Yes! Bad credit business loans exist and you can get one, too.
Running a business is no easy feat. And it becomes even tougher when you are in need of funds but have bad credit. One of the major financial hurdles businesses face today is cash crunch. Bad credit only amplifies the challenge of financing.
But can a business get a business loan with bad credit?
How do Business Loans with Bad Credit Work?
Although a poor credit score makes it difficult for you to access funds through the traditional banking channel, there are many more options to consider when it comes to business loans with bad credit. With most banks rejecting applications if you have a credit score below 600, a large percentage of small and medium businesses face a similar hardship.
Most traditional lenders will deny you funds if you have a poor credit history. For lenders, your credit score is the measure of your creditworthiness. The higher the score, the higher the probability you will make good on your repayments. Banks are wary of lending to businesses with a low credit score because they don’t want to risk the chance of default payments.
The businesses with a good credit score are able to get business loans at the best rates and competitive terms. On the other hand, a business with bad credit has to contend with high fees and rates to make up for the potentially higher risk the lender will take on. There are many business financing options available to businesses with bad credit as discussed below.
Business Loans Types for Bad Credit
Here are some bad credit business loans and financing options available to businesses with poor credit. You can use any of the following methods to meet your cash flow requirements.
The business owner offers something of value like real estate as collateral in exchange funds. In the event of default, the lender can sell off the collateral to meet any costs incurred by him. Although it increases the risk to the business owner, it greatly reduces the risk borne by the lender. Businesses with bad credit often use this option to get funds. While this means less risk for the lender, it’s a tremendous risk for the business owner.
A person with good credit co-signs the loan with the business that has bad credit. By co-signing, the person becomes responsible to repay the debt in the event of any default by the business. It is a gamble for the cosigner but can help the businesses get access to cash.
Working Capital Loans
A business with bad credit can obtain a short-term working capital loan by providing valuable assets as collateral. The funds from a working capital loan are used to meet the daily cash flow requirements for the day-to-day operations.
Businesses with bad credit can get a capital business loan by using the equipment purchased as collateral. In case the business defaults, the equipment will be repossessed and sold to recover any expenses. Since the most expensive investment a business makes is in equipment, equipment financing allows the business to pay in installments while maintaining a positive cash flow.
A business can sell its accounts receivable or invoices to a factoring company at a discount for instant cash. The factoring company collects these invoices and makes a profit. Since the invoices involve revenue the business has already realized, it poses significantly lower risk for the lender. But factoring is a great financing option for a business that is unable to get a traditional loan due to bad credit.
Business Cash Advance
If a business is unable to get a business loan due to bad credit, then a business cash advance is a very good option. This allows the business to get the funds they need and repay by way of small deductions from the future credit card and debit card sales. For this option, your ability to repay is not based on your credit scores. Repayment of a cash advance is somewhat similar to that of a term loan. You get the funds upfront, and then you make regular payments until the outstanding balance is paid off.
Why Choose First Capital Business Finance
Higher Approval Rates: When most traditional lender will say no to lend you funds based on your poor credit history, we say yes. In fact, First Capital Business Finance has high approval rates and low processing time.
Real Financing Options: We offer a wide variety of financing options with no obligation to process credit cards, and no collateral assets or real asset.
Smooth Application Process: If you need funds for your cash flow now, you shouldn’t have to wait until after your credit score is better to apply for a business loan. You could end up losing many business opportunities. Fast track application processing makes it easier for you to access funds instantly.
Flexible Rates: Our business is to make your business a success. At First Capital Business Finance, we provide business loans with flexible terms and low rates. With a quick application processing system, we aim to allow you quick access to actual money for your business plans.
Great Support: With round the clock support services, we deliver reliable financial assistance when you need it. We offer business loans to all business owners irrespective of collateral or bad credit.
Find Bad Credit Business Loans with First Capital Business Finance
Get pre-qualified within minutes over the phone! All you need to do is fill out your requirements and we will handle the rest. Call us at 888-825-1669 or contact us online to get bad credit business loans that fit your needs today!
Yes, Bad Credit Business Loans Exist | First Capital Business Finance – USA