Don’t Let Bad Credit Stop You From Starting or Expanding Your Business

 If you’ve tried – and failed – to get a bank loan to start or expand your small business, you’re not the only one. Many small business owners are still feeling the bad credit repercussions of the Great Recession, and these days, only about 27 percent of entrepreneurs who apply for a small business bank loan actually get one.

But if you need money to start or grow a small business, there’s hope. Just because you have bad credit, doesn’t mean you can’t get the money you need to make your business dreams come true. Bad credit business loans are available from numerous lenders, and there are also other factors besides your credit rating that a lender might take into consideration when choosing to let you borrow funds. A short-term business loan from an online lender might be an option for you, as might invoice factoring or other revenue-based options. Let’s take a look at some of the financing options for business owners with bad credit.

Invoice Factoring

Unpaid invoices are the bane of most small business owners’ existences. The sooner your unpaid invoices get paid, you might think, the sooner your cash flow situation will improve. But it’s frustrating – and risky – to leave your business’s cash flow at the mercy of customers and clients who may take their time paying an invoice. Invoice factoring provides a way to get money for your unpaid invoices now, instead of waiting 30 to 90 days for your client or customer to pay.

You see, not all bad credit business loans are technically loans. With invoice factoring, you actually sell your unpaid invoices to a factoring company. They’ll take a small fee – usually only a few percent – off the top for their trouble, and loan you 85 percent of the money you’re owed up front. The company then owns your unpaid invoices, and will collect payment from your customers directly. When the factoring company collects payment from your customer, they’ll send you the rest of the money you were owed, minus their fees. This way, you can get the money you need now to make payroll, buy supplies for your next job, and stay in business.

Revenue-Based Loans

Many small business lenders care less about your credit score and more about your business’s revenue. While traditional bank lenders typically have the highest revenue requirements, in addition to other strict criteria, online revenue-based lenders may be willing to give you a loan on the basis of smaller revenues.

Your revenues show the strength of your business. When you can show a lender that your business generates consistent revenue, that proves you have a certain level of business acumen and can be trusted to repay your revenue-based loan. The amount you’ll qualify for depends on how high your revenues are and how long you’ve been in business. Higher revenues and a longer business history may mean you’ll qualify for a larger loan.

Short-Term Loans and Lines of Credit 

Many online lenders offer short-term business loans or business lines of credit that can give aspiring entrepreneurs and small business owners alike a means of accessing fast cash when they need it. A short-term loan allows you to borrow money and pay it back over a period of three to 18 months, with weekly or even daily repayments. These loans are often available to borrowers with poorer credit scores, and they can be a good way to get fast cash to solve a cash flow problem or invest in an expansion.

Business lines of credit are more flexible. These are more like credit cards, in that the credit is there for you when you need it, but you can use as much or as little of it as you need. A line of credit can also be a good option to solve and prevent cash flow problems, allowing you to stay stocked up on supplies and continue making payroll, even during slow periods.

There’s no reason why bad credit needs to stand in the way of your business success. Plenty of small business owners and aspiring entrepreneurs overcome credit problems to build thriving businesses, and with bad credit business loans, you can, too.