Having a low credit score can be a significant handicap for small businesses. But if you have a poor credit rating, you may still be able to get financing through local bank loans, traditional lenders, and peer-to-peer lenders. Here are some steps you can take to get approved for business financing with bad credit.
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1. Apply for a Small Business Loan
The first step in getting financing with bad credit is to get pre-qualified for a small business loan.
A lender can examine your financial situation, including your debt-to-income ratio and your credit score, to determine whether the business can realistically repay the loan and whether the loan is worthwhile to make.
Later in the process, you may need to provide documentation to support your loan application, but being pre-qualified increases your chances of getting a loan when you apply.
A small business loan from a local bank or credit union is an excellent way to get financing with bad credit, as many small banks and credit unions will give small businesses the same treatment as large corporations.
An SBA loan can be a good option, especially finding a lender specializing in small business lending.
Depending on your business type, you may be able to get a traditional loan through a bank, through an SBA loan, or with a peer-to-peer lender.
2. Consider a Non-Borrowing Solution
Having a poor credit rating doesn’t mean you have to borrow money to finance your business.
There are several ways to finance a business without going through a lender. Securing a bank loan can be difficult, but you can explore other sources of cash.
You can take advantage of a credit card or line of credit, get a personal loan, or ask friends, family, or partners in your business to help you out. You may also be able to sell some of your personal assets to raise cash.
3. Apply to a Business Credit Card
If your business has excellent credit, you may be able to get a credit card that can help you finance your business.
Business credit cards can be a great way to finance a business if you have good credit, and you can even run your own business expenses through the card to earn points and rewards for your business.
Having a business credit card can help you get business financing with bad credit by helping your business build a good credit history.
4. Get a Business Line of Credit
If you can’t open a business credit card or have bad credit, you may be able to get a business line of credit to finance your business.
A business line of credit can allow you to pay down the loan gradually through a series of interest-only payments.
Business lines of credit can be an excellent way to get financing with bad credit, especially if you don’t have an excellent personal credit history.
Get Started with Porter Capital Today
Getting a small business loan when you have bad credit can be a challenge, but you don’t necessarily need to get a loan to finance your business. Selling some of your personal assets, securing a credit card, or getting a business line of credit can help you get financing for your business without getting a loan.
Porter Capital offers working capital solutions to businesses all over the country in a variety of industries. As a direct lender and factoring company, we have provided over $6 billion in funding since inception. If you need company financing in Birmingham, AL, contact us now! We look forward to knowing you.