Easiest Business Loans to Get with Bad Credit

Securing a business loan with bad credit can be challenging, but it’s not impossible. Various lenders offer loans designed specifically for individuals or businesses with poor credit. These loans may come with higher interest rates and stricter terms, but they provide an opportunity for businesses to access the capital they need. In this article, we'll explore the easiest business loans to get with bad credit, the types of lenders that offer these loans, and tips for improving your chances of approval.

Understanding Bad Credit Business Loans

Bad credit business loans are specifically tailored for businesses or entrepreneurs with low credit scores. A credit score below 600 is generally considered poor, but various lenders are willing to work with these scores, offering loans with adjusted terms. Traditional banks may turn down applications from businesses with poor credit, but alternative lenders, online lenders, and credit unions often provide more flexible options.

Types of Lenders for Bad Credit Loans

Several types of lenders offer business loans for those with bad credit:

1. Online Lenders: These are the most accessible lenders for bad credit borrowers. Online lenders offer quick applications and fast funding, though their interest rates tend to be higher.

2. Credit Unions: Local credit unions might be more understanding of your financial situation and may offer more favorable terms than traditional banks.

3. Microlenders: These organizations offer small loans and may be more willing to overlook a poor credit score in favor of your business’s potential.

4. Invoice Financing: If your business has outstanding invoices, you can use them as collateral to secure financing through invoice factoring.

5. Merchant Cash Advances: A merchant cash advance allows you to borrow against your future sales, but it can be an expensive option due to high fees.

Easiest Business Loans to Get with Bad Credit

1. Online Business Loans:
Online lenders have become a popular option for businesses with bad credit. Companies like OnDeck, BlueVine, and Fundbox are known for their lenient credit requirements and quick approval processes. These lenders focus more on your business's cash flow and revenue rather than just your credit score. However, interest rates can be steep, often ranging from 10% to 50% APR.

2. Equipment Financing:
If you need to purchase equipment, equipment financing is an excellent option. This type of loan is secured by the equipment itself, making it easier to qualify for, even with poor credit. Companies like Crest Capital and Balboa Capital are known for offering equipment financing to businesses with low credit scores.

3. Business Credit Cards:
Certain business credit cards are designed for those with poor credit. While these cards often come with higher interest rates, they can be a stepping stone to better financing options in the future. Secured business credit cards, where you provide a cash deposit as collateral, are an option worth considering.

4. Invoice Factoring:
For businesses that deal with clients on a net-30 or net-60 basis, invoice factoring can be a viable solution. By selling your unpaid invoices to a factoring company like BlueVine or Fundbox, you can get immediate cash without needing perfect credit. The lender advances you a percentage of the invoice amount and then collects the payment from your customer.

5. Merchant Cash Advance:
A Merchant Cash Advance (MCA) is an advance against future sales. It’s easy to qualify for, especially for businesses with a steady flow of credit card transactions. However, it’s one of the most expensive financing options available, with fees that can equate to APRs in the triple digits.

Tips to Improve Your Chances of Approval

Even with bad credit, there are steps you can take to improve your chances of securing a business loan:

• Improve Your Credit Score: Start by paying down existing debt, disputing any inaccuracies on your credit report, and making timely payments on current obligations. Even small improvements in your credit score can make a difference.

• Prepare a Strong Business Plan: A well-thought-out business plan can convince lenders of your business’s potential, making them more likely to overlook a poor credit score.

• Offer Collateral: Secured loans are easier to obtain than unsecured ones. Offering collateral such as equipment, real estate, or inventory can improve your chances of approval.

• Show Consistent Revenue: Lenders want to see that your business has consistent cash flow. Providing detailed financial statements can help build their confidence in your ability to repay the loan.

• Seek Out Smaller Loans: Smaller loan amounts are easier to get approved for, and you can use them to build your credit profile for future, larger loans.

Alternatives to Business Loans for Bad Credit

If securing a business loan proves too challenging, consider these alternatives:

• Peer-to-Peer Lending: Platforms like LendingClub and Prosper allow you to borrow directly from individuals, bypassing traditional lending institutions.

• Crowdfunding: Websites like Kickstarter or Indiegogo can help you raise small amounts of money from a large number of people.

• Grants: Depending on your business type and location, you might qualify for a grant, which doesn’t require repayment.

Conclusion

While getting a business loan with bad credit is more challenging, it’s not impossible. Online lenders, equipment financing, and invoice factoring are among the easiest options to explore. By understanding the types of loans available and taking steps to improve your financial profile, you can increase your chances of securing the funds your business needs to grow.