Your credit score will become a major factor if you want to obtain funding for your small business. While a high score can make it easy to have a credit line extended your way, a low credit score may make offers difficult or even impossible to come by. By understanding what your options are if you have a low credit score, you can take the steps you need in order to fund your small business.|
Consult with the Small Business Administration
The Small Business Administration (SBA) is one place that you may be able to get a business loan with bad credit. The SBA works to provide loans to businesses rather than individuals, so the eligibility requirements will be based on business aspects rather than the owner’s financial history. Factors that may be examined include how the business receives its income, where the business is located, and ownership characteristics.
Consider a Microloan
A microloan is something that’s created by a non-profit organization and will provide small grants for the purpose of helping with startup businesses. These are designed specifically for women and minorities. Loans are also made available through the microloan program with the Small Business Administration, and these funds are lent out through the use of non-profit intermediary lenders throughout communities. Microloans can be great options for businesses that have no credit or poor credit due to their lenient credit requirements.
Look for Funding from Family and Friends
Over half of business owners receive financial backing and assistance from family and friends. Most likely, your relatives will want to see your business succeed, and they may be able to provide financial assistance that can make your dream of running a business into a reality. Your loved ones are also less likely to dwell on the fact that you have a poor credit score, and unlike banks, they will evaluate your request based on your business conditions and character.
B>Research Merchant Cash Advances
A merchant cash advance is a short-term loan that is paid out in a lump sum to the owner of a business. This is done in exchange for part of the company’s future sales from credit cards. Companies that use this financing option offer fast cash access without the need for an excellent credit rating on the part of the business owner. Some companies will approve request for funding and will provide the money in 48 hours. Unfortunately, interest rates for these loans are usually higher than what a traditional lender might charge.
Raise Your Business Credit Score
If you are considering how to get a small business loan with bad credit, there are certain steps that you can take in order to improve your credit score:
Pre-pay or Auto-pay
Vendors may offer you a discount for pre-payment of certain bills, and if you have a utility bill due each month, consider setting up an automatic payment. These activities can help you to ensure that you are making your payments on time each month, and this responsible payment history can help your credit score.
Check Your Business Credit Report
Your business credit score is calculated using a complicated mathematical equation that will predict your likelihood of default. The credit bureaus will examine a variety of things, so you should ensure that information on your credit report is correct in regards to:
• Outstanding account balances
• Company size
• Credit history length
•Credit utilization and payment habits
•Public records (including bankruptcies, liens, and judgments)
Keep Business and Personal Accounts Separate
Even if your personal financial situation is problematic, you can still build a positive business credit history. This will help you to establish a positive track record for potential records. For this reason, it is important not to combine your personal and business bank accounts.
Your dreams of owning or operating a small business doesn’t need to end just because you have a less than stellar financial history. While it may be more difficult to access small business loans with bad credit, funding sources are out there. Consider alternative funding options and strategies to raise your credit score, and you will have your business up and running in no time.
Joy Mali is an active blogger who is fond of writing articles on Finance and educating people to monitor their credit report on regular basis to minimize the risk of fraud. Follow her on Twitter to know more on how to fund your small business with a poor credit history.
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