Whether a small business is looking to hire additional employees, buy new equipment, or undertake new marketing efforts, it all costs money. Cash flow management, working capital, buying inventory – you name it, the costs add up fast.
But unfortunately, there are often obstacles that stand in the way to small business funding needs. Poor credit scores are often the biggest challenge for small businesses, especially when they are trying to secure a small business loan to meet their capital needs.
If this scenario sounds familiar to you as a small business owner, know that you’re not alone. A lot of small businesses suffer with bad credit, limited credit history, or other impediments to securing a business loan or other funding source.
This can make it extremely difficult to manage operations, let alone expand. However, recent growth of alternative, non-bank lenders have started to make things easier for small businesses. These days, obtaining business funding with bad credit is more possible than ever before.
Learn more about bad credit business loans, alternative non-bank lenders, and how you can use these tools to access the capital you need, improve your credit, and allow your small business to succeed.
Why Credit Scores Matter More to Banks
Just as your individual credit score matters a great deal in your personal financial life, so too does your business credit score matter in your business life.
It’s meant to be a measure of your financial responsibility, and to provide lenders with a numeric representation and assessment of how trustworthy you are with your finances, and, likewise, how much of a risk you are for lending.
In practice, however, there are numerous things that can drive down your business credit score, that doesn’t necessarily mean you are a risky investment or have issues with your finances.
And, many new small businesses don’t have a lot of opportunities to establish a good credit score to begin with, due to fairly high bars that need to be met for small business loans with traditional financial institutions and banks.
This is a particular area of small business funding that business owners should understand. Commercial banks have strict regulations related to lending, regulations that only got tighter after the financial crisis of the late 2000s.
Traditional lenders and banks have always been very risk-averse when it comes to lending. Many only offer small business loans to a very select, small group – the cream of the crop, so to speak.
This is because small businesses are inherently risky – about half fail within the first 5 years. Therefore, they set the criteria for lending quite high, including credit score requirements, limiting many small businesses’ access to critical small business funding.
Alternative, Online, Non-Bank Lenders
Fortunately, alternative non-bank lenders have arisen in the last decade to offer another way forward. Many of these lenders are online-based and private. They are not commercial banks, and therefore do not need to abide by the same financial regulations and risk considerations.
They are free to set their own metrics for risk, and their own minimum credit scores and other requirements for lending. For example, with a traditional financial institution or bank, securing a small business loan with a credit score below 700 is effectively impossible.
Alternative lenders, however, generally have credit score requirements 100-200 points lower as the minimum for lending.
In addition, many online alternative lenders specifically offer bad credit business loans, geared toward making credit and financing available to businesses with limited credit history or a poor credit score.
That means that business loans for small businesses are available as a viable means of business funding with bad credit. Even if you’ve been turned down by a bank before, many online alternative lenders can approve you for a loan to fund your business.
There are other benefits to working with an online alternative lender as well. These include:
- Faster application process and response time than banks and traditional lenders
- A lot less paperwork, and often the entire application process takes place online
- More flexible small business funding options with different durations, repayment terms, and other aspects that make them easier to work with
- Most online alternative lenders offer a variety of small business funding options, including products specifically marketed as bad credit business loans, with fairly low minimum credit score requirements.
Options for Business Funding with Bad Credit
The category of bad credit business loans is fairly broad, as there are several actual products that small businesses can qualify for, even with bad credit.
Each lender is unique, just as each business is unique, and the associated requirements and qualifications will vary from lender to lender. Likewise, some of these financing products are more well-suited to certain types of businesses and expenses than others.
Regardless, some of these small business funding options are briefly described below as a brief introduction to what they are, and how they work.
- Short-term small business loans are loans that are meant to be repaid in the short term. They usually have repayment terms that start right away, and require daily or weekly payments.
- Small business loans without a qualifier usually are designed to be used over a medium to longer term, with monthly repayments.
- Business lines of credit are credit facilities, provided on an ongoing basis, that allow small business owners to draw against the facility, only pay interest on the outstanding balance, and re-draw against it once it is repaid (very similar to a credit card account).
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Merchant cash advances are a popular choice for businesses that do a lot of debit or credit card sales. You receive a lump sum up front, and repayment is made automatically as a deduction from future credit or debit card sales.
This has the added benefit of being directly tied to sales, rather than having set repayments based on calendar dates, and are ideal for businesses that are sales-oriented and highly seasonal or variable in terms of their income and expenses.
Bad Credit Business Loans and More from BizFly Funding
Now that you know a bit more about bad credit business loans and other small business funding products, you should consider applying. One of the best non-bank alternative lenders around today for securing a small business loan is BizFly Funding.
They’re a US-based lender that focuses solely on the small business funding market. They offer all of the aforementioned types of small business funding products, an online application process, and funding available within 1 business day following approval.
They also specialize in offering bad credit business loans with very generous (low) eligibility requirements. To find out more, read about bad credit business loans.
