If poor credit stops you from qualifying for typical lending alternatives such as BDC or bank loans, there are various alternative funding options available to firms with lower credit ratings. Here are the top four choices for companies with bad credit scores, along with explanations of why they're effective for small business loan:
Business cash advances
Business cash advancesMerchant cash advances (MCAs), which can be obtained from direct internet lenders, are a type of non-loan financing known as a purchase of future receivables. MCAs allow lenders to provide you with a lump sum in exchange for a portion of the daily or weekly credit and debit card sales made by your company. Your payments will be higher on days or weeks when your sales are higher because the percentage they take as payment varies.
Why this works for businesses with poor credit scores: Your credit score is examined when you apply for an MCA, but because repayment is contingent on sales, your business’s cash flow may be a larger factor for alternative lenders.
Microloans
Microloans for modest projects are provided by a few local non-profit groups, with funding ranging from $500 to $10,000.
Why this is effective for companies with poor credit scores: These loans are primarily designed for business owners who are from underrepresented or disadvantaged groups or who operate socially responsible enterprises. Your company's objectives must coincide with the non-objectives profits in order to be eligible for a microloan.
