Monthly Archives: May 2017

Business Loans for Bad Credit

Although it may seem like you need to have stellar credit and multiple years in business to secure financing, in today’s lending environment that statement is far from true. In fact, there are over 44 different financing options available to business owners, and not all of them require an A+ personal or business credit grade.

Very poor credit will likely put you out of the running for the lowest cost loans such as bank loans and SBA loans, however you will find that some of those 44 financing options are still wide open to you and your business.

There is a trade off. Business owners with bad personal credit can often secure financing, but the more risk the lender assumes because of your poor credit scores, the more likely you are to pay a higher annual percentage rate (APR) to cover the extra risk.

This can seem counterintuitive—why would lenders charge more to the business owners who historically have the most trouble paying back debts? Doesn’t it make sense for the lender to charge less so the bad credit borrowers will have a better chance of paying it back?

That may sound better from the borrower’s perspective, but unfortunately it’s the lender’s money, and thus the lender’s ball game. Lenders charge a higher interest rate to individuals with low credit scores to offset a higher expected default rate. (Keep in mind that, although lenders are giving you a capital infusion to help you grow your business, they are trying to grow their business as well, which means maximizing their return on investment.)

Let’s take a look at some of the better options when it comes to business loans for bad credit.

Business Loan Options for Bad Credit

Microlenders:

Microlenders are institutions, often operating not for profit, that help low-income or underserved small business owners secure loans.. These loans are “micro” in the sense that they are usually only available in smaller amounts. Up to $35,000 is typical.

There are many microlenders, and each has their own set of rules and requirements. For example, Accion is a microlender that serves small businesses that need assistance with startup costs. A personal credit score of 575 or higher is required, so if you meet their other requirements this can be an option if your scores are lower than average.

The Association for Enterprise Opportunity (AEO) helps business owners find microlenders by state and business focus. Try a quick search and check out the microlenders’ individual websites to find out what their specific credit requirements are.

 

Kiva

Kiva is a microlender that deserves its own callout because of its unique model. It offers entrepreneurs 0% interest loans up to $10,000. The only catch is that entrepreneurs must crowdfund their own loans from the philanthropic individuals who use Kiva’s platform. Kiva has over one million donors and boasts a 94% success rate. To qualify, you must have a business plan and invite friends and contacts for initial funding.

Kiva also reports your payment history to Experian Business. This is great news for the future of your business—if you make on-time payments, you start to build a higher business Intelliscore credit score.

 

BlueVine

BlueVine is an option for B2B businesses who have long invoice cycles and often find themselves waiting to get paid for services or products they’ve already delivered. If this sounds familiar to you, or you experience irregular cash flow and would like to free up some of your cash, BlueVine advances up to 85% of your outstanding invoices up to $100,000. To qualify, you’ll need a 530 personal credit score, and your business must be a U.S.-based business-to-business (B2B) business.

Small Business Grants

When you’re starting a new business and investing your time, energy, and often your own hard earned cash into it, the promise of “free” money often sounds enticing. Chances are that you’ve stumbled across at least a few advertisements promoting business grants to help you fund your venture. So what’s the deal with business grants? Are grants available? Are you or your business eligible?

The answer to these questions depends on many variables, so we’ll get to that in a moment. First, let’s start off by defining, in loose terms, what a government business grant is (or in some cases, is not). Federal business grants are funded by tax dollars. Because of that, grant eligibility and approval is a very tightly run ship.

Furthermore, government business grants are appropriated through, well, the government (specifically Congress and the White House). As such, many of these grants are closely aligned to the agendas of a specific government agency like the U.S. Department of Education or the U.S. Department of Agriculture.

If it seems like receiving a business grant, specifically a government-funded one, is tricky. And it can be. Here are some general guidelines and requirements that the federal government uses to determine business grant eligibility:

If your business doesn’t necessarily fit into the requirements listed above (many do not), there is still hope. State and local programs do exist, as do grant opportunities through other groups and organizations. For example, many large corporations offer grants through an affiliated foundation (i.e. Walmart Foundation Grants), as well as a number of networks that specialize in grants for women.

Additionally, businesses that can attribute to positive gains in local tourism, child care, and energy conservation, and healthy nutrition may also find grants to support their initiatives.

 

Where to Find Additional Information on Grant Opportunities

If you think your business qualifies for financial assistance through a grant, or if you’re simply not sure if you’re eligible, you can look for additional information by:

  • Visiting Grants.gov. Here, you’ll be able to search over 2,000 grants. You’ll also be able to enter keywords like “small business grants” to help you find specific results, as well as a list of requirements, tips, and other pertinent information to help you.
  • Check out SBA.gov. Specially developed to help small business owners, this site can help you find essential information about grants, loans and other financial assistance available. You’ll also have access to a community of small business owners who’ve probably had experience with the small business grant application hunt.
  • Visit your local and state government websites. As mentioned above, specific grants may be available through local and state governments. Check their sites to see what may be available for your business financing needs.
  • Search corporate or nonprofit organizations within your specific industry or location. Often times, you can search grant networks to help you on your search.

If you’ve exhausted all your options and you’re still not able to find a grant to help fund your venture, don’t give up hope! The truth is, many current or potential business owners find themselves in the same boat. Sometimes grants simply aren’t the answer. Luckily, there are other perfectly viable means to obtain the funds necessary to finance your business plans.

Finding business financing and services can be a chore. To save you time, we take your credit scores and search through financing offers, business services and other deals to match you up with best offers. See Your Credit Rating and Financing Offers for Free (No Credit Card Required).