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Is bad credit making it tough for you to get business loans?

Henry Githinji

Henry Githinji

Henry plans to be an entrepreneur with his own financial consultancy firm, specializing in in binary options and stock trading. Henry is a day trader and plans to use the capital he makes to launch his business. He plans to build a portfolio that attracts investors through his trading performance.
Henry Githinji

Is bad credit making it tough for you to get business loans?

Business loans

Business loans

Over the decades, many business owners complained about being denied of loans by banks. Actually, out of the many who apply for a loan, only 27% are guaranteed approval. This is frustrating for many business owners who would want a quick loan to either expand or start their businesses. However, many of these business owners have bad credit scores. This makes it difficult for them to get loans from traditional banks as the latter will check on their credit history. Furthermore, small businesses may be disadvantaged due to their small sizes. Hence, business owners who failed to get bank loans may opt for other borrowing alternatives such as merchant cash advance companies.  

For the various alternatives, the business’ credit card score is not checked. However, these alternative lenders will still check the company’s bank history, especially the amount it has been depositing into its bank account and other credible sources such as credit partners. Some of the things that alternative lenders may check include:-

  1. Regular deposits in the bank
    Regular deposits

    Regular deposits

Regardless of having a bad credit score, a company may still be able to get a loan from the alternative lenders  just by calculating 10% of their annual gross deposits. This program is known as the revenue-based loan. The downside of this type of loan is that it takes around seven days to be deposited into the company’s account. Interest rates of the revenue-based loan are also slightly higher than a traditional bank loan.

  1. Credit card sales

This type of funding is also known as merchant cash advance.  In this kind of financing, businesses are provided with upfront cash and they can exchange it for future credit card sales. Merchant cash advance funding may be costly since some providers charge as high as 38% interest rate. However, other lenders may offer fixed monthly payments. Therefore, you are free to choose whichever works better for your business, in this case, merchant cash advance companies.

  1. Credit partner

Your business may use its credit partner to obtain a loan from traditional banks.  Your business may be able to borrow a loan with their name and repay it in due time. However, your credit partner must have good credit scores. This is a risky move if your company is unable to repay the loan as your credit partner may be forced to take on the loan on your company’s behalf.

There are many alternatives in the market where your business may get a loan even if it has a bad credit score. It is important to always do some research before deciding on where to apply for a business loan. In any case, if your company chooses to have a credit partner, make sure that it will be able to pay back so that it does not ruin its rapport with its credit partner. Merchant cash advance financing is definitely the way to go!

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