credit-loans

 

Small business owners are oftentimes leery of applying for a loan due to their credit. As entrepreneurs, you face this issue as you work to propel your business in the marketplace. Start-up costs can be overwhelming, inventory, payroll, and other overhead expenses can leave pockets empty and credit scores low. So, how does an entrepreneur get a loan while having credit issues?

 

The Small Business Administration recently published an article detailing ways to get around bad credit. Luckily for small business owners, there are alternative funding programs that will grant line of credits or loans even if your personal credit is bad.

 

Check out the alternative funding methods below:

 

Bank deposits – A business with regular bank deposits can put its cash flow to work with revenue-based loans. This program is based on the deposits going into the business bank account on a monthly basis. Typically, a business can obtain a business loan equal to 10% of its annual gross deposits regardless of having bad credit. Another benefit of this program is the time it takes to get funded, which is approximately 7 business days.

 

Keep in mind the loan term can be as long as 18 months with this program, with rates slightly higher than a traditional bank rate. It requires no collateral, financials or tax returns. Repayments are made in small increments every day via ACH from the business bank account.

 

Credit card sales – This type of funding program, known as a merchant cash advance, provides businesses with upfront cash in exchange for a portion of future credit card sales. For businesses that have regular monthly credit card sales but struggle with bad personal credit, a merchant cash advance may be a viable option.

 

However, be very selective on what merchant cash advance provider you select. Some providers can cost as high as 38% while others can be as low as 12%. In addition, when it comes to repayment, the majority of merchant cash providers take a fixed percentage of your daily credit card receipt volume until the advance you took is paid back. Other business cash advance providers may offer a fixed monthly installment payment for its repayment method.

 

Credit Partner – Using a business partner(s) as a credit partner for obtaining lines of credit in the form of business credit cards can be a viable solution to overcome a personal credit challenge. A business partner who has strong credit scores is the best place to look. You may also want to consider someone who may be interested in participating in your business as a potential credit partner.

 

This method does bring risk to the credit partner because they are cosigning with the business to obtain funding. However, it’s important to note the type of unsecured business credit cards I am referring to will not appear on the personal credit reports of the cosigner unless they go into default.

 

For more information and/or assistance with business loans, visit www.sba.gov.