If you’re looking for the easiest way to get a business loan with bad credit, you have a few options. Unsecured business loans are an option, but you can also try crowdfunding. Getting a business loan with bad credit is possible, but you may not have the best credit score to qualify for a traditional bank loan. If so, you may want to read our tips for getting approved for an SBA 7(a) loan.
Unsecured business loans
The benefits of unsecured business loans are twofold. First, you don’t have to worry about the lender seizing your business assets in case of default. Second, you’ll get funding quickly. Unsecured business loans have been approved for more than 10,000 small business owners. Below we outline four lending options that are right for you. One of these options might be an ideal option for you. Whatever your situation is, an unsecured loan may be the right option for you.
Secured business loans
Taking out a secured business loan may seem like a good idea if you have a bad credit score. However, lenders are risky in offering loans, and a secured business loan will require collateral such as a business vehicle or property. Using this type of loan can be better suited for startups or borrowers with less than perfect credit. The advantages of this type of loan include faster application and approval, lower interest rates, and the fact that the lender can recover its losses by selling the collateral in case of loan default.
SBA 7(a) loan
If you’re looking for a business loan with bad credit, you may want to apply for an SBA 7(a) loan. This type of loan is issued by third-party lenders who are guaranteed by the Small Business Administration. Those with less than perfect credit may be eligible for this loan program because it allows you to borrow up to 50% of the loan amount.
When you don’t qualify for traditional bank loans, crowdfunding can help you get your business off the ground. By using peer-to-peer lending platforms, you can access millions of dollars from a network of business owners, and many crowdfunding platforms offer free mentorship programs to help you make the most of your loans. However, you should remember that these loans are often higher risk than traditional bank loans because they don’t have any government protection. Also, you are riskier to lenders because you don’t have the assurance that your business will succeed.
If you have a poor credit history, applying for a line of credits or short-term loan can be expensive. Fortunately, you can ask vendors for terms that will allow you to make regular installment payments on your current balances. While this isn’t a long-term solution, it can help you get cash flow problems under control. Vendor terms are a great way to improve your business’s credit score.
Lines of credit
When you have bad or no credit, getting a business loan may seem impossible. You can still find alternatives, though, such as merchant cash advances and short-term loans. However, lines of credit are the most flexible type of funding solution. You can draw funds from your credit line as needed, and interest will accrue only against the capital borrowed. That makes them a good choice for business owners with bad credit.
Small business credit cards
While most businesses with less-than-perfect credit may find it difficult to get a bank loan, there are options for small businesses with poor credit. Small business credit cards are a popular alternative, and some offer no annual fee, low interest rates, and other perks. Small business credit cards can help a business with bad credit buy equipment and cover short-term cash needs. However, the payments can be a major burden, especially when cash flow is tight. Make sure to find a card with reasonable payments and a low interest rate.
Adding credible business partners
The quickest way to secure a business loan with bad credit is to find a reliable lender who will work with you. Most lenders will require that you have a certain credit score, but there are also lenders that will look at your revenue and collateral. Read the terms and conditions of any loan you are considering and be sure that it will work within your budget. Adding credible business partners to your business is an excellent way to boost your credit score and establish your financial status.