If your credit is terrible, you don’t necessarily lose your chances of getting funded. However, your choices will surely be less than ideal. And the worse your credit is, the riskier lenders will perceive you to be, and the more interest they will charge you.
These are you’re the most popular options for you:
1. Friends and Relatives
If there are people in your circle who might want to invest in your business, you may also get a business loan bad credit from them. Then again, this could be difficult if you’re a start-up entrepreneur, either because you need too high an amount, or your friends and relatives themselves are strapped for cash. Additionally, they may think it’s too risky to lend you money due to your bad credit.
A microloan is just like any traditional bank loan, but they are usually provided by alternative lenders such as credit unions. A microloan is generally easier to obtain for those with less than stellar credit because, as the name indicates, the amounts to be loaned are small – about a maximum of $50,000. Due to this, credit requirements for microloans are lower as well.
3. Business Credit Card
If you can get a credit card using your company name, make purchases and pay on time, you will be able to get financing while establishing good business credit. Things like terms of payment, interest rate, and credit limit will be different for each provider, and there will be varying eligibility requirements too.
4. Merchant Cash Advance
A merchant or small business cash advance, otherwise known as a business cash advance, is only good for those with cash flow issues and needing $10,000 max. Cash advances often have sky high interest rates, which means you will nearly surely pay much more than the principal amount loaned in the long run, particularly if you miss payments.
5. Bank Loans
This option is unlikely available if you have bad credit since traditional lenders are limited in terms of whom to finance. Even so, it’s not completely impossible, but your interest rate will much higher than a regular rate, and more collateral will be required of you than a a borrower with better credit.
6. Home Equity Line of Credit
This type of business loan is also called “betting the farm,” and it goes without saying that comes with a huge risk. This is only good for applicants who own a house, which will be put up as collateral for the loan.
7. Revenue-based Loan
Finally, check if you are eligible for a revenue-based loan. This usually requires that your credit score is above 550, your business earns 100,000 in yearly sales, and the amount you borrow is less than 10% of your revenue. Typically, it takes about a week to be approved for this type of loan.
You may also take a look at http://www.huffingtonpost.com/nerdwallet/dont-let-bad-credit-keep_b_8651028.html if you want to read/watch further.