What are the Best Loan Options for Businesses with Poor Credit Scores?

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(Newswire.net — June 6, 2018) — Alternate funding options have been on the rise in recent years. However, business owners still prefer approaching the traditional options first. This trend has led to over 63% of the entrepreneurs approaching banks for business loans. Sadly, only about 27% of them qualify for the funding they require to expand their businesses. Not getting enough money during the hour of need often leads the small firms to default on their small business loan payments, employee salaries, and vendor invoice payments. A number of these factors including unpaid credit card bills can contribute to poor credit scores and lousy business profiles.

Why do you need to revisit your loan options?

The bad credit score is a problem that is plaguing the entire nation and not just a few individual owners. Bad credit is like a plague in the U.S. small to the medium business scenario. A lot of budding entrepreneurs are not getting access to the cash their companies deserve due to terrible credit records.

A new loan enables companies to hire new talent and buy new equipment that can contribute to their business profit. In a way, having money increases the chances of receiving more money. Irrespective of market reports that confirm a rise in the number of small businesses that are receiving small-business loans from banks, the overall percentage remains bleak. It is indeed tougher for smaller firms to find approval for loans from traditional banks.

What are the best credit options for companies with bad credit scores?

If your business is currently suffering from a bad credit score, you need to stop worrying and keep reading. These ideas from Sunwise Capital can increase your chances of finding the right loan amount on your terms and from the right people.

Keep your bank deposits up-to-date

Any business with regular cash deposits can utilize it for getting revenue-based loans. This loan takes about one or two business days for approval. It is a huge benefit considering the waiting time other forms of SBA loans involve. The downside is the loan amount you can access. Typically, non-bank lenders allow the business to obtain about 10% of the annual deposit. The loan amount partially depends on the credit score or the business’ age. The loan term can extend as far as 18 months or even two years for revenue-based loans. You can expect to pay more than the monthly interest rate of your home mortgage. Additionally, you can enjoy the benefit of accessing a loan amount that requires no financials, tax returns or collateral. You can opt for daily, weekly or monthly payments from your business bank account via ACH.

Credit partner

You can get new lines of credit from your existing business credit cards by leveraging your business partner. It is a practical way to overcome all credit challenges that might arise due to poor personal credit. If you approach a bank or a credit union with bad FICO scores, they are more likely to refuse your request. That is where your partner can rescue you. If your partner has a spotless FICO credit report, you can request them to approach the potential creditor. Many businesses do not have existing partners. If that is the case, you can always consider opening your doors to a reliable, meticulous and experienced business partner, who can also bring to your business the ability to get funds. However, do not forget to weigh the pros and cons of bringing in a new partner to an already established business before you sign him or her on board.

Merchant cash advances

It is a form of funding that provides businesses with emergency cash in exchange for a portion of their future sales. Credit card sales or merchant cash advances are the best options for companies that struggle with poor credit scores. Bad FICO scores range between 500 and 650. Depending on the score you have and your past debt records, the merchant cash advance company can charge you between 15% to38% for the credit. The process comes with its caveats. The advance companies usually take a small part of your credit card sales daily, until you repaid the loan in full. Business cash advance providers offer daily and weekly repayments terms and rarely on a monthly basis. 

With the rise of technology, businesses with poor FICO scores are finding cash loans more accessible to fund their upcoming projects on flexible terms. Right now, there are several websites and online companies that finance high-risk companies. The current technology makes it profitable for loan companies to grant more substantial cash advances to the client companies. Therefore, you might find the business capital you are looking for even with a less-than-average credit score if you know where to look.