When it comes to obtaining a bank loan, bad credit isn’t just a thorny issue: it’s an immovable obstacle.
Indeed, for reasons that have little to do with reducing risk and much to do with generating profit, over the last decade banks have severely tightened up their small business lending requirements. In particular they insist on exceptional personal and business credit scores (which is an even bigger problem for some small business owners, who don’t even know that they HAVE a business credit score in the first place!).
Fortunately, banks — and credit unions for that matter — certainly aren’t the only options. There are several practical, affordable and strategic funding solutions available that don’t require good credit. In fact, even a discharged bankruptcy or an open tax lien typically aren’t deal-breakers.
Below, we highlight 6 types of business loans for bad credit that you can apply for right now, and likely start using to cover expenses and investments in as little as 24 hours.
6 Business Loans for Bad Credit
- Working Capital Loans
Working capital loans are straightforward short or long-term loans with fixed, regular payments (typically monthly). This type of funding is also unsecured, which means that you don’t have to pledge business and/or personal assets as collateral.
- Equipment Financing
Equipment financing enables you to immediately purchase the equipment — such as machines, tools, technology, and more — that you need to improve efficiency, enhance competitive advantage, onboard more customers, and ultimately increase profitability.
- Inventory Financing
Similar to equipment financing, inventory financing enables you to procure inventory — or if you’re a manufacturer, raw materials that are developed into finished goods — now vs. later. This type of funding is especially valuable to channel partners, resellers and franchisees that are contractually obligated to maintain minimum stock levels at all times.
- Accounts Receivable Financing
A business advance technically isn’t a loan. Rather, it’s an advance on pending accounts receivables. This not only ensures that you get paid now vs. 30, 60 or 90+ days in the future, but the lender takes on all risk if a customer fails to pay an invoice, or delays in paying an invoice.
- Merchant Cash Advance
Similar to a business advance, a merchant cash advance technically isn’t a loan. Rather, it’s an advance on future payment card (credit and debit) sales, which is why this option is typically suitable for B2C retail operations like restaurants, auto repair shops, hardware stores, etc. After the close of each business day, a small percentage of daily sales is automatically withdrawn and applied to the advance balance. Notably, this means that the total cost of borrowing doesn’t increase if it takes longer than anticipated to clear the balance.
- Business Line of Credit
Yet again, this isn’t technically a business loan — but many business owners leverage this option to cover unexpected costs and temporary shortfalls. Three other key advantages include: access to funding is instant, interest is only charged on the amount borrowed, and if the line is revolving then repaid amounts are immediately available for future borrowing.
How to Get a Business Loan with a Low Credit Score
To learn more about any of these business loans for bad credit, contact the National Business Capital team today or simply complete our streamlined online application in a single minute! And if you’re concerned about your credit score: please don’t be. We look at many other factors, which is why we approve about 90 percent of business loan applications — compared to about 15 percent at big banks. When they often say NO, we usually say YES. If you’ve been turned down at a bank before due to a low credit score, check out this FREE eBook with our best funding tips and insider industry knowledge to help you get a business loan when banks say “No”: