If you are a small business owner and you have bad credit, you probably have
experienced resistance from banks for business loans. They are reluctant to work with small businesses, partly because of repayment concerns if the owner has had previous financial trouble. Businesses that do not have regular income streams have a hard time making payments, so the banks focus more on businesses that can show at least two years of profits from tax returns. Meanwhile, startup businesses must usually seek alternatives for financing.
Establishing Your Business
Before you seek any type of financing, whether it’s from traditional loans or quick business loans, you need to make sure your business is well organized and that you are tracking your finances carefully. By investing in accounting software or some form of bookkeeping ledger, you can always be aware of what your account balance is at any given time. You need to avoid estimating and guess work and keep exact track of every transaction. Planning your purchases in advance based on a budget will help clarify your financial projections.
Instead of depositing all your money in one account, you should develop a separate account for emergencies and expenses that are not top priorities. You never know when unexpected disasters can interrupt your business. You should also stay up to date on you taxes, so that you can convince lenders you are running a responsible business. Keeping your taxes current also allows you to make necessary write-offs that can help you save money in the short term.
Access To Capital
If you have good credit you can establish credit lines for your business. But if you have bad credit with personal debt, you will be limited in your ability to borrow. There are various types of quick business loans you can turn to, such as payday loans and car title loans, but these loans are usually designed for small amounts of cash with high interest rates and short term repayment schedules. You can also borrow from friends and family, which is not always the best idea because it can hurt relationships if repayment becomes a problem.
Your eligibility for personal loans will mostly be determined by your credit score. If you have a credit score of 720 or above, you should have little problem getting approved for a personal loan. It just becomes a matter of which bank you want to borrow from, in which you can decide based on who offers the lowest interest rate. A credit score as low as 680 can still make you eligible for personal loans, but a lower score becomes very unlikely.
Merchant Cash Advances
An alternative to quick business loans is a merchant cash advance. This type of financing is not the same as a loan because it involves getting cash upfront for future credit and debit card transactions that are repaid with those transactions. In order to qualify for this type of cash advance, however, your business needs to be earning thousands of dollars per month from credit or debit card transactions. These types of advances can benefit businesses with volatile revenue. They also do not involve fixed payments or credit checks.
Quick Business Loans
One of the best choices for business owners with poor credit is a quick business loan because it does not involve a credit check. These loans are designed to be repaid quickly. The past performance of the business will determine the amount of money you can borrow. These loans are helpful for businesses that have intermittent cash flow and need help to meet payroll or professional fees.