Small Business Financing Options If You Have Bad Credit

Starting, growing or expanding your small business typically requires an infusion of cash. You may have difficulty getting a loan if you have poor credit, though. Here are several financing options you can pursue if you have bad credit.

What is Bad Credit?

Most lenders consider your business’s strength, annual revenue and time in business as they decide if you’re a good risk. They also check your credit score.

A high credit score indicates that you’re probably a good risk and likely to repay the loan. You can also earn a lower interest rate and longer repayment terms when you have a high credit score.

Credit scores can range from 300 to 850. A bad credit score of under 649 could prevent you from getting a loan.

Your credit score depends in part on factors like:

  • Annual income.
  • Cash flow.
  • Financial history.
  • Current debt.
  • Payment history, including any late payments.
  • Open credit accounts.
  • Charge-offs when a lender writes off debts after you miss six months of payments.
  • Accounts in collections.
  • Foreclosure on a commercial or personal property.
  • Legal judgments from a court when you lose a civil lawsuit.
  • Bankruptcy.
Types of Bad Credit Small Business Loan

You can use a small business loan to build your credit history or cover additional staff, payroll, business insurance premiums, inventory purchases, repairs, taxes, emergencies, or rent. Compare the different types of bad credit loans for which you may qualify.  

  • Cash advance - Use existing cash flow to obtain fast cash even if your credit score is as low as 500.
  • Merchant cash advance - Receive a lump sum you can repay via a percentage of your future sales.
  • Short-term loan - Repay this high-interest loan within a short time frame of three to 18 months.
  • Secured, collateralized or loan asset-based loan - Use your commercial or personal real estate, equipment or other property as collateral to secure the financing you need. If you don't repay the loan, the lender will own the collateral.
  • Factoring - Rely on unpaid invoices as collateral or exchange those invoices for financing from a factoring company.
  • Unsecured loan - Gain short-term or long-term financing even if you don't own any assets.
  • Online lenders - Review terms and conditions for loans from Kabbage, Fundbox, OnDeck, BlueVine, StreetShares, and Dealstruck, all designed for small businesses with poor credit.
Repair Your Credit

Despite your bad credit, you can get small business financing thanks to these options. In the meantime, work with your financial advisor to create a budget, pay your bills on time, repay debts, and increase your assets. These steps can raise your credit score and sustain your successful small business.
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