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:

1. 800-900 – Highest bracket; excellent credit history
2. 700-799 – Very good credit history; lowest interest rates available
3. 650-699 – the Lowest score that can receive standard loans
4. 600-649 – Fair score; higher interest rates applicable
5. 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.

As you seek out new financial solutions for your business, you’re wondering about merchant cash advances. What is an MCA, and what can it do for your small business?As it turns out, a merchant cash advance has serious benefits for small businesses. Check out these advantages, and you might be convinced that an MCA is the right move for you.

Funding Based on Your Future, Not Your Past

One of the biggest benefits of a merchant cash advance is that your future is more important than your past. With a traditional bank loan, you must provide your business’s past income and revenue. They’ll also want to see the business’s credit score and maybe your personal credit score.A merchant cash advance, however, is extended on the basis of anticipated future sales. The lender examines your past credit card and debit card sales to make an estimate about what you’ll earn in the future. They offer the advance based on what you’re likely to bring in.That’s great news for small businesses without a lot of history under their belt. Plus, since it’s forward-looking, it takes into consideration that your business is growing. That’s much better than a traditional loan that looks at your past and doesn’t consider your future needs.

You Can Use It for What You Need

A merchant cash advance offers more flexibility to a small business. Some traditional loans will earmark your funds for particular business uses. An equipment loan, for example, needs to be used to buy equipment. A payroll loan must fund payroll.An MCA can be applied to either of these expenses. Since the funds aren’t earmarked, you could use the MCA to help with payroll. Then you could take any leftover funds and put them towards that equipment.You can even use the MCA to help with day-to-day operations. Need petty cash? The MCA’s funds could stock it up. What about keeping the lights on? The MCA could help you with the electricity bill too.This gives small business owners greater freedom and flexibility than other traditional loan products.

A Merchant Cash Advance Offers More Payment Flexibility

Perhaps the biggest benefit is that the MCA gives small businesses more flexibility when repaying the advance.With a traditional loan, you’ll have a set monthly payment. If you experience a poor sales month, then you might only be able to make a partial payment. You might default on the loan or require another loan to pay it back.The MCA is different. The lender takes a percentage of your actual credit card sales as payment. When you have a good month, you can pay your MCA back faster. If you hit rough waters, then the payment decreases accordingly. You don’t need to worry about defaulting on the payments.

Discover the Benefits of an MCA for Your Business

These benefits can make a merchant cash advance the right choice for many businesses, but they’re especially helpful for small business owners.Ready to see what an MCA could do for your business? Get in touch with the experts to get the funds you need today.

Today’s small businesses don’t need to rely on big banks for financing options. Over the past decade, there has been a rise in alternative MCA Industry that make it easier and faster for startups and small businesses to find the cash they need when they need it.When business owners consider applying for a merchant cash advance (MCA), it is usually because they are in need of cash flow immediately, have poor credit, or haven’t had success with traditional loan applications. MCAs give business owners flexibility as funds can come through to their bank accounts within days and the transaction requires no personal guarantee. This is because MCAs are not considered loans, so there is no need to put up collateral to receive an advance.Merchant cash providers are strictly offering an immediate cash infusion for a portion of a business’s future earnings through repayment plans or a percentage of upcoming credit card transactions. As credit card use has expanded, this type of lending has become increasingly popular with businesses whose sales often come via card, not cash.As the MCA industry continues to grow, what will the future of MCA lending look like?

Collaboration with Commercial Banks

The success and growth of the merchant cash advance industry have led commercial banks to reevaluate their lending requirements to become more competitive with MCA providers. While banks must maintain strict lending standards, they may begin to partner or collaborate with MCA industry leaders like investors, advisors, or partners.Commercial banks are noticing the simplicity and necessity of offering small businesses quick and easy financing but may not be able to provide it themselves. By working with an MCA provider, they can give their clients additional options that have been vetted by the bank.

Changes in Oversight

One of the main differences between merchant cash advances and other more traditional forms of funding is that MCAs are exempt from state and federal oversight. This means MCA providers with poor reputations can go unchecked and there are no set standards in place for interest rates or procedural best practices.With the recent boom of the MCA industry, it may be necessary for an increase in oversight to help clamp down on lenders who are mistreating clients or to set standards for this growing sector. This would help protect small businesses, as well as lend credibility to those MCA providers that are doing the best work for their clients.

Additional Offerings

Some MCA providers are beginning to diversify their offerings to compete with new financing options offered by prominent names like PayPal and Square. This means some MCA providers may consider offering more traditional loans, lines of credit, and cheaper rates than their larger competitors.In addition, since small businesses are beginning to have more and more confidence in the MCA process, the interest of venture capitalists and other investors has grown. This might mean the creation of new technology and credit score models that may disrupt how financing has previously been regulated.