Bad Credit Business LoanAll you need to know about small business funding in Canada.
If you own a business or want to start a business and you need to take out a loan for any reason, you might feel that your bad credit will hold you back from obtaining the funds you need. Can you get a small business loan with bad credit? Fortunately, thanks to innovative lenders and unique products, the answer is yes. There are steps you can take to obtain business financing with low credit.
Why Is It Hard to Get a Business Loan with Bad Credit?
Imagine a scenario in which you have owned a business for five years, and that business has grown substantially each year since it was opened. Now you want to open a second location in another city in order to generate more revenue. You go to the bank, talk to a loan officer, and apply for a term loan so that you can get the money you need to open that new retail location. However, if your credit history is poor and you have a credit score of less than 600 to 650, you will probably be declined. Big banks often look at your credit score first and foremost, and if it is too low, the overall success of your business – and your sales – makes absolutely no difference.
You Have Options
Fortunately, if your bank turns you down for a business loan due to poor credit, you still have options available to you. There are many private lenders out there who can work with you to provide you with the funding you need regardless of your credit score. An alternative lender can provide options for business loan terms that suit your needs, and the applicaton process is often much easier. Note that you will need to open a business bank account in order for a private lender to provide you with funding. Here are three financing options available to you, even if you have bad credit:
Merchant Cash Advance – A merchant cash advance is based on your company’s time in business and monthly credit card sales instead of your personal credit score. This gives you much more flexibility in the long run. There is only a one-time fee and never any interest, and you repay the loan with a percentage of your daily sales.
Private Term Loan – A private term loan or private business loan is an alternative to a business loan from a bank that is based almost solely on your credit. With this type of loan, you get the same perks, but you repay it with a fixed daily repayment term. This lessens the risk for the lender, which means that your credit doesn’t weigh as heavily on the lender’s decision.
Business Equity Line of Credit – Finally, a business equity line of credit is yet another product that you can obtain with less-than- perfect credit, particularly if you have a lot of equity in your business. It can be risky since you are essentially putting a large stake of your company on the line for collateral, but it is also a great way to get a lump sum of money without perfect credit.
Rebuild Your Credit
When it comes to getting a business term loan, the qualifications are easy to meet. And similar to business credit cards, you can also use small business loans to help rebuild your credit over time. The better your credit is in the future, the more funding sources you will have available to you, and the better your interest rates will be. These small business loans are surprisingly affordable, as well.
Every business needs access to credit in one shape or form, so don’t let bad credit hold you back. If you need money to expand, purchase equipment, manage your business cash flow, or simply stay afloat during a rough period of time, consider either a merchant cash advance, a business term loan or a business line of credit.
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