Funding for Businesses with Bad Credit History

Mar 2023

Jan 2025

Businesses need a robust cash flow to sustain their operations and generate profits. At times they may need to borrow funds to acquire resources, maintain operations, or grow. Unfortunately, various factors can adversely affect a business's ability to borrow from traditional financial institutions. These factors include having a poor credit history or insufficient credit history, missed or late payments, high debt-to-service ratio, bankruptcy, records of default, or simply being a relatively new business.However, there are many funding solutions available for Small Businesses that don’t fit the bank or credit Union model.These options are:

1. Merchant Cash Advance

A merchant cash advance is a financing option that offers businesses a lump sum cash payment in exchange for a percentage of their future credit card or debit card sales. This type of financing is best suited for businesses that require quick cash and have a high volume of credit or debit card sales.The primary advantage of a merchant cash advance is the speed and ease of accessing immediate cash funding. The process typically takes only a few days, and the funds become available within a short period.Business owners should take in account that although merchant cash advance is a convenient cash flow instrument and allows you to get funding within a few days, it may come with higher fees and interest rates due to their quick access to cash.

2. Invoice Factoring or Cheque Factoring

Invoice factoring, also known as cheque factoring, is a financing option that enables businesses to utilize their outstanding invoices in exchange for a cash advance that is immediately available. The lender collects payment from the business's customers and pays the business the remaining balance minus the financing cost. This type of financing is ideal for businesses with bad credit history since their ability to borrow is based on the creditworthiness of their invoice customers rather than the borrower. Businesses with long-term contracts, high-value invoices, or those needing cash to immediately purchase materials to fulfill high-value invoices should consider this type of bridge financing.Manufacturing, construction, transportation, and wholesale/distribution are businesses that can benefit from this type of financing to meet their immediate cash flow needs.The main advantage of invoice factoring is that the lender typically assumes responsibility for collecting payment from the invoice customers or payers. This can free up valuable time and resources for the business to focus on other aspects of their operations. Furthermore, businesses with long payment cycles, delayed payments, or long-term contracts that involve milestone payments can obtain the necessary cash to expand or continue operating their businesses immediately.Similarly to merchant cash advance companies, factoring lenders may charge a high fee for assuming the risk of collecting on the invoice and the time gap until the invoice is due for payment.

3. B-Lender Loans

B-Lender loans are non-traditional financing options provided by private equity firms or online lenders. These lenders are often willing to lend to businesses with bad credit or little credit history for various purposes. They understand the complexity and cash flow requirements of small businesses and work with them regularly. This type of loan comes in various sizes and forms, depending on the business needs and the business entity's qualifications and lending risks.B-Lender loans are a great financing option for start-ups, small businesses, seasonal revenue businesses, or those in urgent need of short-term financing. Traditional lenders typically require creditworthiness, good credit history, and collateral, but B-Lenders often have significantly more flexibility. These lenders are specialized in dealing with the complexity of newer and smaller businesses and can provide loans with less stringent due diligence processes and quicker turnaround times to meet business needs.However, it is highly advisable for borrowers to understand the terms of the loan and carefully review the terms and conditions before accepting them. B-Lender loans are less standardized and customizable and can vary significantly in terms such as repayment, interest, default events, settlement, and legal jurisdiction. Businesses should also be aware that B-Lender loans may come with higher fees and interest rates due to their higher risk tolerance.B-Lender loans can be a great option for businesses that are just starting or facing challenges with traditional lenders. These loans can provide flexibility, speed, and customized financing solutions to meet their specific needs. However, careful consideration of the terms and conditions and full understanding of the associated costs are crucial before committing to this type of financing.

4. Instant Payday Loans

Instant payday loans are short-term loans that can be used to cover unexpected expenses or emergencies. They are easy to obtain and are often offered by online lenders. Borrowers may receive access to immediate relief cash within hours, thanks to the quick and standardized approval process of the lenders that provide these loans.Instant payday loans are suitable for individuals with emergency cash needs or who need access to immediate cash to cover unexpected expenses. Some typical uses for instant payday loans include medical bills, car repair bills, and home repair bills. These loans can offer immediate cash relief to ensure a person has the cash to cover daily living needs to continue working and earning money.Payday loans can be useful for individuals who have low credit scores or limited credit history and may not qualify for traditional loans.Borrowers should know that instant payday loans typically have high interest rates and fees for their ease of access and quick approval process. The repayment period is often within two to four weeks. As these loans can be accessed quickly and easily with minimal documentation requirements, these could be beneficial for individuals who need immediate cash and don't mind the associated fees.In summary, there are various types of non-traditional lending and financial services available to businesses and consumers in Canada. These services can provide cash relief for a variety of situations, depending on the borrower's needs and qualifications.Merchant cash loans are suitable for businesses with high credit or debit card transaction volume and immediate cash needs. Invoice or cheque factoring can benefit businesses with valuable invoices with longer repayment terms. B-Lender loans are a great option for start-ups or small businesses with an immediate cash need to expand or maintain operations. Instant payday loans can provide relief for individuals with unexpected or emergency cash needs.Overall, non-traditional lending and financial services can provide valuable solutions for businesses and consumers with unique financial needs. It is also vital to approach them with caution and careful consideration of the associated costs and repayment terms. With the right lender and loan terms, these financial services can help businesses and individuals overcome cash flow challenges and achieve their financial goals.

June 5, 2019

January 24, 2025

How to Expand Your Business with Merchant Cash Advance Benefits

Cash flow issues are a concern for most small and mid-sized business owners. In fact, many SMBs find it difficult to manage growth because of concerns about funds. Having access to the right funding makes it easier to support business growth. There are many different choices out there, but a merchant cash advance might be one you want to consider. Not convinced an MCA is the right choice for your business? Take a look at these Merchant Cash advance benefits and discover how MCAs could help you grow.

Lightning-Fast Access to Funds with a Merchant Cash Advance

One of the biggest benefits of an MCA is how fast you can access the funds you need to grow your business. Whether you need to cover a bill or you want to put a new marketing strategy in place, an MCA helps you do it sooner.Traditional loans can take months to arrive in your bank account. That’s after all the work of preparing your application and waiting for approval too.With an MCA, you could have the funds in your account in a matter of hours.

Think about the Future, Not Your Past

Most traditional forms of business funding rely on your financial history. Lenders will look at your credit score. If you’ve missed a payment or two, you might not qualify for a loan.An MCA is more forward-thinking. Instead of checking your credit score, the lender estimates future credit and debit sales.The lender then offers you a lump sum based on where you’re going, not where you’ve been. If your credit score is less than stellar, an MCA could be the right choice to help your business grow.You also don’t need to provide personal guarantees like you would with a loan.

Merchant Cash Advance Benefits Include More Flexibility

Flexibility is another reason to consider merchant cash advances for your expanding business.A traditional loan offers you a one-time, lump-sum payment. You’ll then pay the amount back with monthly scheduled payments.Merchant cash advances are different. Instead of paying the same fee every month, the MCA is repaid by a percentage of your credit and debit sales.If your sales dip one month, so too will your payment to the MCA. If you have higher than expected sales, your payment will increase too. This can help you pay back the MCA faster.This flexibility makes it much easier for a growing business to manage repayment. With merchant cash advances, you can stop worrying about making your loan payment.

Use Funds as You See Fit

With a traditional bank loan, you may have to tell the lender what you’ll use the funds for. Loan approval is then tied to buying equipment or investing in real estate.What if your needs change from month to month? Market conditions change quickly, and businesses like yours need to stay one step ahead.With a merchant cash advance, you’re in control of how the funds are spent. If you need to pay bills today and invest in a new website tomorrow, an MCA can make it happen.

Ready, Set, Grow

If you’ve been wondering how to fund your business’s growth, consider a merchant cash advance. The easy application process means you could have the funds you need in short order.If you’re not sure an MCA is right for your business, get in touch with us. We can help you discover the right alternative lending solution for your business.

June 26, 2020

January 24, 2025

Ideas for Newbie Entrepreneurs in 2020

The business environment has changed rapidly for the young entrepreneurs in the first few months of 2020, and the overall outlook for many industries hasn’t been exactly rosy. That may be enough to stop some people in their tracks. Is it really a good idea to create a start-up in this business environment?For those who are willing to look, though, opportunities abound. Tech businesses specializing in remote work and delivery services have been flourishing. As much as the environment is challenging, it’s also a rich space for reimagining the way people go about their daily lives.If you’re pondering a new business in 2020, take a look at some of these innovative ideas.

Everything Online

In March 2020, almost every business owner scrambled to move their operations online in some way. While some businesses have to be operated out of a factory, many others can take advantage of eCommerce and mobile apps to keep running.Tools for remote work, such as video conferencing and online workspaces, have boomed. Some innovators have looked to ways to create events in online spaces. Plenty of media companies are offering up entertainment in new and exciting ways, such as through livestreams.

Seeking New Ways to Connect

Self-isolation, social distancing, and quarantine have made it more difficult to connect with friends and family. As such, people are looking for new ways to stay connected, as well as new ways to connect.A business idea that brings people together in a new way could go far in 2020.

Focus on the Essentials

The current business climate has also caused people to refocus on the essentials: food and medications. If your business is related to medical equipment, pharmaceuticals, or food, you likely have a good chance.Innovative ways of bringing people essentials will be at the top of the hot list of ideas for entrepreneurs in 2020.

Funds Make It Real

No business can get off the ground without the right funding. If you’re looking to start a business, then you should make sure you know all about business loans, merchant cash advances, and other funding options. With them, you can make a good idea a better reality.

November 18, 2019

January 24, 2025

How To Get A Business Loan With Bad Credit Score?

As a small business owner, when you go to a bank for a business loan, instead of looking at the performance of your business, the bank will check your personal credit score first. This means, even if your business is performing well and profitably, a fair credit score of 600-650 could prevent you from getting a small business loan. A credit score of under 600 portrays you as a high-risk borrower and will make it nearly impossible to borrow even a small loan.A low credit score stops business loans being disbursed to profitable and stable businesses. Bad credit history will follow you and your business for years. For example, you may have owned a successful business for a few years and now you are looking for funds to expand into another city or purchase more equipment, but when you visit the bank, the loan officer turns you away. Why? The answer is easy – his decision is based on your poor personal credit history.

Credit scores

There is no standard scale that defines your credit score. That evaluation varies from a credit agency to a credit agency as they set their own criteria. A credit report from Equifax may give a person one number, while a credit report from another institution will very likely suggest a higher or lower credit score for the same person. Credit scores in Canada are officially assessed by two entities: Equifax and TransUnion.

The higher the credit score, the safer it is to lend to you
Credit scores typically range from 300 to 900

Credit score brackets:

800-900 – Highest bracket; excellent credit history
700-799 – Very good credit history; lowest interest rates available
650-699 – the Lowest score that can receive standard loans
600-649 – Fair score; higher interest rates applicable
300-599 – Low scores; less likely to receive business loans

Therefore, if you have a credit score of 649 or lower, it will dramatically reduce the chance of your business loan being approved. Since major banks first look to the business owner’s personal credit score, even exceptional business performance may not make you eligible for loans, or high-interest rates may apply to you.

What happens if you have a low credit score?

If the borrower has a bad credit score, other than a higher likelihood of being refused a loan by the major financial institutions, there are a few other ramifications:

Higher interest rates on loans and lines of credit
Difficulty finding business premises
Security deposits required by utility companies
Higher insurance premiums for business assets

Private lenders help small businesses with bad credit history get loans

Fortunately, there are ways of getting business loans for your company even if you - the borrower - have bad credit. To get small business loans with bad credit history, private lenders are one of the best options. These are more local lenders, better tuned to market conditions, who offer more flexible loan options. There are many private lenders that can provide small business loans. Bad credit history or credit score will make little or no difference to the loan, depending on the type of loan you opt for. Moreover, the application process is much easier and repayments are more flexible. It is possible that a private lender will ask you to open a business bank account with them before they provide you with funding.

How to get a business loan with a bad credit score?

Merchant cash advance (MCA) lenders provide cash advances, customize private terms and business equity line of credit to small business owners. This would be the best way to get a business loan with no credit assessment, and beneficial repayment terms if you happen to have a bad credit history. Instead of checking your personal credit score, a merchant cash advance provider assesses your business’ performance and monthly credit card sales.The MCA lender will give you an upfront sum of cash in exchange for a percentage of the business’s daily credit card income. The MCA lender will tie into the credit card processor directly to settle credit card payments so the business owner does not have to worry about missing the payments or dealing with administrative processes. There are many pros and cons of having MCA but regardless of that, it is still considered as the best way to get business fundings.A private term loan gives you the same perks as a small business loan from a major lending institution. However, the private lender does not give the same weight to your bad credit when deciding on the small business loan. Instead, the lender mitigates the risk with fixed daily repayment terms.A business equity line of credit is much less reliant on the credit history of the business owner. Therefore, if you have a bad credit history and require financing for your business, you can use your equity in the business as collateral. A business equity line of credit helps businesses resolve their cash flow issues, though it does require putting up a part of your ownership as collateral.

Start-up bad credit business loans

For entrepreneurs with bad credit seeking business loans for their start-up, private lenders and alternative lending are the best options. Where small business loan applications at major institutions have a less than 25% chance of approval, merchant cash advance (MCA) approvals stand at over 97%! This is because MCAs do not evaluate the business owner’s personal credit score, and only take into account business performance. Besides that, MCAs can be approved within 4-6 hours.Government loans and grants are also great options. Both have flexible repayment terms and offer additional business support to small entities. However, some of the government loans may require a good credit history and may have strict eligibility criteria.

Using business loans to rebuild your credit

Apart from using funds to expand their business, business loans can help borrowers improve their personal credit scores. Once you opt for an equity line of credit or a private term loan, make sure to pay on time and your credit score will improve over time. As a result, the better your credit score is, the lower your interest rates will be and you will have a greater chance to access financial lending markets.Borrowing is an inherent part of any business regardless of its size and the industry it operates in. Major financial institutions and private lenders usually lend to businesses with exceptional credit histories opposed to those with a bad one. Don’t let your bad credit history stop your business from getting the financing it needs. Options such as a merchant cash advance (MCA) will provide you with the required funding, as well as improve your credit card history in general. If you think it might be a good solution for you, do not hesitate to get in touch with us.