FICO defines bad credit as a score of 300 to 629. This is a common reason why lenders reject small business loan applications. If you have poor credit, you’re tabbed as higher risk, which makes it more difficult for you to get approved for business funding. However, even with bad credit, there’s still light at the end of the tunnel. Let’s see what merchant loans you can get with bad credit.
When Your Business Is Considered High Risk
In many cases, especially when your business is in its first few years, you may need to get access to affordable working capital. This can help you expand, acquire inventory, pay overhead expenses, and obtain equipment.
Of course, traditional loans from traditional banks or other financial institutions can be hard to obtain. The reason is that they require strong credit and revenue, and you may simply be unable to make the cut.
Thankfully, alternative online lenders have made it quite easier for business owners of all types and sizes to get the funding they need. So, paying some common business expenses, even when credit history is an issue, is no longer a major obstacle as it may seem several years ago.
However, you should understand what it takes to get approved for bad credit business loans before applying for them. It’s important to find reputable lenders that offer funding options in the amount you need.
The thing is that bad credit business loans come in a variety of forms. Each of them has different qualification requirements, requires different minimum credit score thresholds, different interest rates, and repayment terms. Alternative business loans may include business credit cards, merchant cash advances (MCAs), or invoice factoring.
Getting Bad Credit Merchant Loans
Getting a business loan from an alternative lender is easier as compared to a traditional one. Alternative business funding providers may accept credit scores as low as 500 or 530. To make sure you have a good chance of getting approved, you’d better check with the lender beforehand on credit score minimums, if any.
It’s important to take into account the following:
- The lower credit scores you have, the more likely you’ll pay a higher annual percentage rate.
- If you can spend some time on improving your personal credit, you may be eligible for more options at better rates.
Fortunately, with a reputable alternative online lender, you can enjoy the lowest rates and the best terms for your own specific business needs. A true professional in the field can offer:
- Fast funding that can be available in as little as 72 hours
- No hassle
- Payments are automatically taken from your credit card transactions
- No fixed monthly payments
- High approval rates
- Easy collections
By the way, a merchant cash advance (MCA) is ideal for bad credit merchants and those in need of quick business funding. Be aware that an MCA isn’t a loan: it’s simply a sale.
Bad credit won’t let you get easily approved for a business loan with fair terms and affordable fees. However, if you work with a respectable alternative online lender, you can overcome bad credit challenges without any headaches.
Author Bio: As the FAM account executive, Michael Hollis has funded millions by using business funding (merchant loans) solutions. His experience and extensive knowledge of the industry has made him a finance expert at First American Merchant.