Most business owners who are trying to overcome bad credit have an unfortunately difficult time to qualify for the funding they need to grow their business. In fact, only 10 years ago, these entrepreneurs may not have the opportunity to finance small businesses on the table.
The reason: traditional banks always had strict requirements for loans to small business owners, and a less than perfect credit score, as a rule, prevented entrepreneurs from qualifying.
Fortunately, times have changed in the world of corporate loans. Non-bank alternative lenders have entered the market, ready to work with borrowers with bad credit.
What are the best loan options for entrepreneurs with Poor Credit Loans? Here are your three best options.
- If you are looking for bad credit business loans that have a structure that you know, short-term loans can match the bill.
- Short-term loans are structured as traditional loans with which you are familiar: you receive a one-off loan, which will pay with fixed payments for a fixed period of time. This is almost the same as that offered by traditional bank lenders – with some key differences.
- Firstly, these loans are, well, short. Instead of being offered for several years, these Personal Loans have a period of three to 18 months. And since they come with such short deadlines, daily or weekly payments are often returned rather than monthly payments of a typical bank loan.
- Short-term loans also have lower limits (from $ 2,500 to $ 250,000), which means that the borrower’s payments will be proportionally lower than those that are liable for a bank loan.
- Fortunately, it does not take much time or effort to apply for a short-term loan. They often have simple applications and very short waiting times for funding, so if you need money quickly to make an important decision, a short term loan may be appropriate.
- Moreover, short term loans are at the top of the list of the best Poor Credit Loans as these lenders usually work with borrowers with a FICO 550 minimum score. Because of short term loan lenders and frequent payments can bring more risks when it comes to choosing who to work.
- So if you are looking for a predictable and simple loan for a small business with your bad credit, a short term loan could be for you.
Line of business credit
While traditional banks are known for their credit lines, alternative creditors also offer smaller, shorter and cheaper credit lines.
With a credit line, you can use a fund of funds that you can access when you need it for your business. You only pay interest on the funds you have withdrawn, and once you have fully paid your loan, your credit line will be recharged to the original amount.
Financing invoices helps entrepreneurs to issue capital when unpaid and labor-intensive accounts slow down cash flow. If this meets your unique financing needs, funding accounts are another important option for entrepreneurs with bad credit.
Alternative: corporate credit cards
Although it is usually not possible to view credit cards for businesses, when business financing is required, you need to add them to the list.
It is better to use these credit cards for your monthly expenses and working capital needs, because in practice these are revolving lines of credit with a high interest rate. However, there are certainly some advantages in seeing a business credit card, but rather as a sort of Personal Loans for a small business.