Bad credit can be a major impediment to obtaining much-needed funds, even for otherwise financially-healthy individuals and businesses.
Learn more below about the ways in which bad credit can have an impact on individuals and small businesses, and how bad credit business finance options like a merchant cash advance can help.
Bad Credit’s Effects on the Individual
The effects of bad credit are fairly consistent for both individuals and businesses (though, arguably, they can pose more of a threat to a business than an individual, as we’ll discuss below).
In general, bad credit can have an impact on an individual’s finances in the following ways:
Decreased or No Access to Credit or Loan Funds
Being unable to borrow money or qualify for credit or loan products can severely limit an individual’s ability to manage their finances, and make the purchases they need to live their lives.
With bad credit, it can be difficult or impossible to obtain a credit card, car loan, home loan, or personal loan – even utility accounts in many cases.
Risk of Job Loss
Many employers in a number of jurisdictions may perform credit checks on potential employees or even existing employees.
Money troubles present a higher risk of theft or industrial espionage in the view of many employers, which may result in lost opportunities for jobs or advancement within an existing job, or outright job loss.
Higher Interest Rates
One of the most visible effects of bad credit is that customers who do qualify for a loan or credit product will pay higher interest rates than those with better credit. This means a higher cost of borrowing, and that you get less for your money than someone with good credit.
Greater Up-front/Down Payments
In many cases, bad credit will mean a higher down payment is necessary on a purchase that is being credit-financed, to reduce the risk to the lender, than for someone with better credit.
For example, mortgage customers may be forced to 20% or more down payment to qualify for a mortgage on a home purchase, which is a tall order for many people, even in relatively cheap housing markets.
Life Consequences
There are non-financial consequences to bad credit as well, which can include stress and anxiety, problems in relationships, limitations in your ability to pursue opportunities like jobs or education, limitations on your ability to move to a more favorable job market or pursue personal goals, and in general greater limitations on your life and freedoms.
Bad Credit’s Effects on a Business
In terms of bad credit and its effects on business, many of the same problems as listed above apply. Higher interest rates, higher down payments, and reduced access to funds are all consistent between individuals and businesses with bad credit.
At the same time, business opportunities may be limited by the effects of bad credit, including:
Problems or Limitations in Starting a Business
A poor credit score can limit small business funding options and amounts significantly, which can prevent many small businesses from even getting started in the first place.
Limitations on Expansion or Taking Advantage of Opportunities
If your business has bad credit, you may be limited in your ability to obtain much-needed funds on an emergent or time-sensitive basis (if at all), which are otherwise required to expand, grow, and pursue opportunities to help with same.
Vendor Issues
Many vendors require letters of credit or perform credit checks before extending credit to businesses for the purchase of supplies and materials.
Bad credit can mean cash-up-front or unfavorable purchase terms, which can limit a business’ ability to get the materials and equipment it needs to function, or end up costing more or having a greater impact on cash flow and capital needs.
Bad Credit Business Finance Options
Fortunately, there are bad credit business finance options available, especially from non-bank lenders. The lending requirements aren’t as strict with non-bank lenders as they are with traditional financial institutions.
Typically because non-bank lenders don’t need to follow the same high level of risk adversity requirements that commercial banks do (since non-bank lenders don’t have customer commercial deposit accounts to protect, and function purely as lenders).
Small business lending options from companies like BizFly Funding can provide small business funding even with bad credit.
Depending on how bad your business credit score may be, and the age, revenue, and other factors of your business, you may qualify for small business loans with bad credit, a debt consolidation loan (which can help reduce your other outstanding debt and improve your credit score), or may need to turn to a merchant cash advance as an option for quick small business funding, even with bad credit.
Merchant Cash Advances
A merchant cash advance can be provided even with bad credit because there is relatively low risk involved compared to a traditional loan.
The lender provides an up-front sum of money for the business to use, and the business repays that automatically from a percentage of future credit card receipts.
The amount of repayment is tied to the sales of the business, so when business is slow, less repayment is made, and when business is better, more repayment is made.
This helps businesses with bad credit to better manage their cash flow over a traditional, fixed-date repayment plan (like you see with small business loans and other kinds of small business funding.
Business Funding with Bad Credit from BizFly Funding
BizFly Funding offers a full range of small business funding options, including bad credit business finance options like merchant cash advances.
To qualify for a merchant cash advance, even with bad credit, customers only need to meet the following minimum requirements:
- Must have been in business for at least 2 months.
- Credit score must be at least 500.
- Must generate at least $8,000 in monthly revenue.
There are also bad credit small business loans and debt consolidation loans available as well, even for customers with less-than-ideal credit scores (with somewhat different, though still quite attainable requirements).
You can apply online, and someone from BizFly Funding will get back to you within a few hours. In many cases, even bad credit customers can qualify, get approved, and get funded within 1 business day.
