Archive for Business Financing
Poor Credit Business Loans
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Typically, poor credit is described as a credit score between 580 and 640. Having such a low credit score can make getting an apartment, cell phone, home loan, or buying a car a very difficult process, if not impossible. But when it comes to getting a bank business loan, lenders are not looking for people who just do not have poor credit, they are looking to lend to people who have excellent credit, which can mean a score of 720 or higher. It is possible to raise your credit score, but it is a process that can take lots of time, and when you need business funds fast, time is not something that you have to spare.
So what is a small business owner to do, when his credit score is not high enough to receive a traditional bank business loan, but his need for business financing is sky high? Poor credit business loans offer a source of business financing especially for business owners in these types of situations, as they are designed for those who do not qualify for traditional bank loans.
What is a Poor Credit Business Loan?
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Functions of a Poor Credit Business Loan
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Poor credit business loans are for small business owners who do not have great credit. They are for small business owners who do not have collateral to offer in order to secure a loan. Poor credit business loans are for small business owners who have been told “no” too many times before, and are ready to find a way to get business financing.
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Do Bad Credit Business Loans Really Exist?
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Seeing the words “bad credit” and “business loan” together in today’s economy may seem almost paradoxical. In the United States, a low credit score is like a scarlet letter, warning others of potential risks. Whether you want to purchase a car, open a cellular phone line, or even rent an apartment, your credit score helps creditors and lenders determine how risky doing business with you may be.
To the disadvantage of many business owners, the banks’ practices are no different. Traditionally, one of the foremost requirements for business loan approval is an excellent credit score, subjecting lots of would-be successful businesses to the laws of Darwinism, competing against businesses owned by people who have excellent credit scores, and qualify for bank business loans. Read More→
Getting a Bad Credit Business Loan
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It has long been said that in order to receive a business loan, a potential borrower must meet and posses the “Five Cs” of credit. Character, capacity, collateral, conditions and capital are all assessed when applying for a business loan and a slight default in any one of these categories can virtually obliterate one’s chances of receiving business funds.
Character
Lenders look towards a borrower’s character to determine their likelihood of repaying a loan. Business experience, personal credit history, references and education can all play a part in a lender’s character judgment, making an applicant with little to no business experience, poor personal credit history, no references and no formal education, a less likely candidate for a small business loan.
Capacity
Capacity focuses on the business’s ability to repay the loan. Therefore, lenders will review a business’s cash flow in order to ensure that the business can generate enough money to support fixed monthly payments.
Collateral
Collateral is used to make sure that lenders get their money back no matter what. Equipment, property, etc. can be used as collateral. Should a borrower become unable to repay a loan, the lender can seize the assets that have been put up as collateral. When a borrower uses collateral to secure a loan, he/she usually feels more pressure to repay the loan, in order to keep the assets in his/her own hands.
Conditions
Usually, bank business loans come with conditions. The borrower has to explain what the loan will be used for and this must be approved by the lender.
Capital
Capital refers to the amount of one’s own money that is invested into a company. When a lender sees that a borrower has invested his/her own money into the company, the lender feels that the borrower has confidence in the business.
Unfortunately, lots of people who need small business loans do not meet these requirements. But there is an alternative source of business financing for these potential borrowers. With a bad credit business loan, the “Five Cs” are practically thrown out the window.
Through credit card factoring, small business owners can get business financing if their business has been in operation for at least four months and processes a minimum of $2,500 per month.
When credit card factoring is put into action, a small percentage of the businesses credit card sales is put towards the repayment of the bad credit business loan. The fact that the responsibility of loan repayment is placed on the business allows lenders to place less importance on the borrower’s character and capital. There are no conditions on how the money can be used, and they can receive money without collateral.
If you are looking to avoid the “Five Cs” of credit, look into a bad credit business loan, and use credit card factoring for repayment.