Are you looking for a business loan but unsure of your options? Are you concerned about your credit score? While certain business loans require you to have good credit, this is not the case for all of them.
Traditional bank financing can be overwhelming. Some businesses even find it difficult to obtain financing with good credit. With that being said, I’m sure you’re thinking how tough it must be with poor credit. Thankfully, there are a variety of business loans for businesses with bad credit. Take a look at these practical options:
1. Equipment Financing
Equipment financing is a great option for purchasing the equipment needed to operate and grow a business. Without efficient equipment, your business is unable to operate with its best foot forward. Equipment financing is a viable option for businesses with bad credit since the equipment itself acts as collateral. In the event of a default, the lender can take possession of the equipment. Once possessed, the lender can sell the equipment in order to recoup their initial investment.
2. Invoice Factoring
Another well-known collateralized loan is invoice factoring. Invoice factoring is the process by which a lender advances money to pay a business’s outstanding invoices. These are then repaid when that invoice is paid by the client, minus a fee that goes straight to the factor company.
With invoice factoring, there is no need for the business to have good credit. Why? Because of the nature of the collateral: Since the cash advance is backed by the invoices, those invoices belong to the lender if payments owed go unpaid.
3. Merchant Cash Advance
A merchant cash advance is perfect for businesses that deal with credit and debit card transactions on a daily basis. When a business takes out a merchant cash advance, lenders offer an immediate lump sum as an advance on future credit card sales. In return, the borrower pays the borrowed money back over time -- in addition to a fee.
With merchant capital loans, you’re agreeing to let the lender automatically deduct a predetermined percentage of your business’s daily sales. This percentage is your repayment until your merchant capital lender gets paid back in full.
4. Unsecured Working Capital Loans
Short-term unsecured working capital loans are similar to merchant cash advances. However, instead of being paid back through future credit card sales, the lender deducts a daily amount from the business's bank account. Because this form of financing isn't dependent on credit card sales, it's a viable option for business who frequently deal with cash transactions.
The Bottom Line
These are a few top loan options for businesses with bad credit. The best way to evaluate the different types of loans and determine which is best for you is to consult with a lending professional. If you're interested in exploring the financing options available to your business, be sure to stay up to date on our blog at http://blog.cmsfunding.com.
Contact us today to speak to a loan specialist about the different types of loan products we offer!