Every year, almost three-fourths of all businesses use some form of financing. Some take out loans to get new businesses off the ground, while others take them out to keep existing businesses afloat.
If you need to get your hands on a business loan for any reason, there are plenty of places for you to turn. But it might be difficult to obtain the loan that you need if you don’t have great credit.
It’s not impossible to take out a business loan with bad credit. But you’re going to have to work a little harder than you would have to otherwise to get the loan you need.
Check out seven realistic options that you have if you need to get a business loan with bad credit.
1. Apply for a Business Credit Card
Lenders that give out business loans are usually apprehensive about giving them to those with bad credit. But many business credit card companies are a little more forgiving when it comes to giving those with bad credit a chance.
You might not qualify for a business loan with bad credit. But you could qualify for a business credit card that you can use to tackle business expenses. You can also use it to build your credit score back up over time.
Just be prepared to take on a high-interest rate in the process. Many credit card companies saddle people who have bad credit with interest rates that are on the higher side to reduce the risk that they’re taking on.
2. Take Out a Short-Term Loan
If you would prefer to take out an actual business loan as opposed to sticking another credit card in your wallet, a short-term loan from a traditional or alternative lender would be a good place to start.
Your bad credit might prevent you from taking out these types of business loans in some instances. But there are lots of lenders out there that specialize in lending money to those with bad credit.
The interest rates on short-term loans will often be high but not as high as the interest rates on business credit cards. Short-term loans will also need to be paid off within a certain period of time—often anywhere from six months to two years—which will prevent you from allowing business debt to hang over your head for too long.
A bad credit business loan could be exactly what you’re searching for.
3. Find Out More About Invoice Factoring
Does your business have a cash flow problem created by a bunch of unpaid invoices? Those invoices could come in handy when you investigate the possibility of using invoice factoring.
Factoring companies will take a bunch of invoices off your hands and give you cash for them. This will provide you with the injection of cash that your company needs.
The big drawback with this option is that most factoring companies will only give you about 80% of the value of your invoices, thus allowing themselves to turn a profit by going out and collecting the other 20%. But it’ll prevent you from having to do it yourself while giving you immediate access to money that won’t need to be paid back.
4. Use Equipment Financing to Your Advantage
If you’re interested in taking out a business loan to purchase equipment for your company, equipment financing might be something worth looking into for you.
With this kind of loan, you’ll be able to finance equipment and make payments on it while using the equipment itself as collateral. It’ll help your business get the equipment necessary for you to become more profitable.
But one thing worth noting here is that, since your equipment will serve as collateral, the company that helps you finance it will be able to repossess it if you miss any payments on it. That’s something you’ll want to consider before using equipment financing.
5. Look Into the Possibility of Obtaining a Microloan
In recent years, many non-profit companies have started handing out what are called microloans to business owners, including those with bad credit. They could be yet another option for your business.
You will, however, usually need to meet certain criteria unrelated to your credit to take out microloans. They’re often reserved for companies in underprivileged communities as well as those companies that would be considered socially responsible.
In some instances, you’ll also need to go through some kind of credit counseling to obtain microloans if you have bad credit. You’ll need to be ready to do this before you even think of applying for a microloan.
6. Put Merchant Cash Advances to Good Use
If your business accepts a lot of credit card payments each month, you might want to look into using merchant cash advances. Although they have high-interest rates and all kinds of fees associated with them, they can help if you’re really in a bind and need a business loan with bad credit.
Merchant cash advances will give you the money you need now. You’ll then turn around and give a percentage of your credit card sales back to the company that lent you the money until it’s paid off.
They’re a decent option for anyone who has tried the other options listed here and been unable to secure a business loan with bad credit.
7. Consider Selling a Percentage of Your Business to an Investor
Do you think that you might be able to convince an investor—or better yet, multiple investors—to buy into your business? It never hurts to ask when you’re in need of cash.
If your business seems to have a bright future, investors might be willing to take a chance on you and give you the money you need. In return, you’ll give them a percentage of your business and, of course, a cut of any of your future profits.
You should be careful about who you let invest in your business. It could cause complications down the line if you’re not careful. But it’s one more way you can get a business loan with bad credit.
Go Get a Business Loan With Bad Credit Today
In a perfect world, you would have excellent credit and have no problem taking out a business loan. But the world is, as you may have noticed by now, not perfect at all.
This means you may find yourself in a position where you need to take out a business loan with bad credit. Try out some of the options found here and see which one will work best for you. You might be surprised by how willing some lenders are to work with you despite your credit situation.
Read our blog to gather more information on business loans.
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