Business Loan For Bad Credit

Is A Business Loan Possible With Bad Credit?

That is a question that is asked far too often in the business world. So it is a question that needs to be addressed, talked about, and answered.

The first thing to point out though is that bad credit does not define who you are as a person. There are many good people who have fallen on a tough economy, and unfortunate circumstances, which has left them with credit scores that are labeled as "bad credit". We've all heard the story, and maybe lived the story, of a good person who trusted a family member or friend and co-signed for a loan, only to be left hanging with a bad loan when that person didn't pay. That was actually a good person who made a mistake trusting someone who they thought was trustworthy. It doesn't make them a bad person, but it does give them a bad credit score. 

Unfortunately, with a bad credit score, traditional banks will not give a business loan to 99% who apply. 
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With over half of America's business owners having bad credit scores, there has to be a way to get a business loan regardless of credit. If there wasn't, we would lose half of the work force in America. So it's back to that question:

Is It Possible To Get A Business Loan With Bad Credit?
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The short, simple answer is YES!
But you might say, "I've tried and tried but the bank keeps turning me down". Of course they are turning you down, and understand that there are two main reasons for it.

1) CREDIT SCORE: With traditional banks, your credit score is what drives the approval or denial, not the person who you are. You might be a great person who will pay back the loan, but a bank only looks at the number!! With a credit score under 680 you will get an automatic denial in most cases. The worst part is that you still have to go through the process of collecting endless amounts of paperwork, and then waiting for months for a decision.

2) COLLATERAL: Most people do not have hundreds of thousands of dollars worth of property or equipment sitting around to borrow against. One of the first questions you will be asked when you apply for a bank loan is, "What do you have for collateral". When you combine bad credit with no collateral you will get denied every time, many of you have already experienced it.
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Don't Be Discouraged!  You Can Get A Business Loan With Bad Credit!!

You will have to settle it in your mind that a traditional bank loan is not an option!

After you have that settled, then you will also have to change the way you think about how a traditional loan works. With a traditional loan, you basically borrow money from the bank, and then are given an interest rate and a term of how long you have to pay it back. With business loans, an average interest rate is 9.99%, and a standard term is 5 years (60 months). This is how our brains naturally think about loans, but since this loan is not an option with bad credit, you have to change the way you think about the loan that is an option.

Okay, first of all, it's only called a loan in the state of California, the other 49 states are required to call it a business cash advance, or merchant cash advance. I always had the thought that if you borrowed money from someone and had to pay it back, it was a loan. Apparently our legal system believes that's only true if you live in California. If you get a loan from a merchant capital company in California it is a loan, as soon as you step over the border into another state it is no longer a loan, but a business cash advance. Go figure!!

What Are The Requirements To Get A Business Cash Advance With Bad Credit? (Loan if you're in California)

1) MONTHLY CASH FLOW: As long as your sales are good, and you have a minimum of $10,000 per month in deposits, you will meet the cash flow requirement. Business Cash Advance lenders look at your last 3 months of deposits and daily balances to determine the amount they will advance to you. Repayment for the advance is taken out of your business checking on a daily basis, so the lenders are looking to see how much you can reasonably afford to have taken out of your account each day MON-FRI (not the weekends). Terms usually range from 3-12 months to pay back the advance, depending on the amount. A money factor like 1.40 is used rather than an interest rate. Here is an example of what a $10,000 business cash advance may look like:
Advance Amount:  $10,000
Money Factor: 1.40 ($10,000 x 1.40 = $14,000)
Total Payback: $14,000
Payback Term: 100 days
Daily Payment: $140
***By changing the way you think about a traditional loan, it will help you make sense of a business cash advance. For more information on making sense of a business cash advance read this article.

2) TIME IN BUSINESS: Most lenders require that you have been in business for over 1 year, however, there are a handful of lenders that only require 4 months, it just limits your options. 

3) CREDIT SCORE: Unlike traditional banks, credit score is not the driving factor in obtaining a business cash advance, monthly cash flow is most important. As long as your credit score is 500 or above you will qualify. The only thing your credit score will do is determine which tier you fall into (A-D). (A) is the top tier with the highest advances, lowest money factors, and longest terms. (D) is the lowest tier with the shortest terms, least advance, and highest money factors. The benefit is that you can still get the money you need for business, regardless of your credit score.

Where Do I Go To Get A Business Cash Advance With Bad Credit?

There are a lot of companies out there nowadays offering business cash advance, but the list is small with those who specialize in helping people with challenged credit. A very important thing to look for is transparency, someone who explains the process in detail as you go, and is willing to educate you on the product so you can make wise decisions. At Small Business Capital US we have decades of experience, an excellent reputation, and a simple 3 step application process. Our team will walk you through each step, explaining the details and the product. From start to finish, funding normally happens within 72 hours, with minimal paperwork. To get started click HERE.