A bad credit score does not mean you’re ineligible for a business loan. There are more options than ever to get money, and the only requirement is that you put in the effort. If you’re shopping for the right loan, here are the best types to get started.
Table of Contents
1. Merchant Cash Advance
How does a merchant cash advance work? This is a question you should know the answer to long before diving deep into a business loan. A merchant cash advance puts a lump sum of cash into your hands to help finance a business. This is a great starting point for any business, and is the main reason a merchant cash advance is preferred for unsecured financing. For this type of loan, the borrowing cost will make or break the contract.
2. SBA Loan
A small business administration loan comes from both banks and lenders. It also comes with the seal of approval from the Small Business Administration. Although it is hard to qualify for this loan, there are plenty of success stories that prove it wasn’t an anomaly for companies with bad credit. You can get up to five million dollars with this type of loan. Make sure to take what you need, as it can be tempting to go for the max amount available.
3. Equipment Loan
When starting a new business, equipment costs can easily eat into your finances. Equipment loans were created to offset this cost, and for vehicles, they are considered a worthy alternative to business auto loans. Whether for vehicles or office equipment, the magical word here is ‘equity’. Since you own the equipment, you have more control over its maintenance. Leased equipment can be a money pit, and in the end, you will never get back the money spent.
4. Term Loan
Term loans are common for businesses that want an alternative to merchant cash advances. The big difference between the two is that term loans with bad credit usually require collateral. The type of assets of personal guarantees is completely up to the lender, so make sure to get everything in writing. And if the money needed is too high, then a term loan may not be the best choice for your business.
5. Personal Loan
A personal loan can be used for business purposes – sometimes. This is in no way a perfect replacement for a high amount loan, and is meant to fill in the blanks or to be grouped with other options. The biggest issue here is that personal loans have higher borrowing costs, and the maximum borrow cap is much smaller than a business loan. But the pros? Personal loans are easier to get, the funding is fast, and in some situations lenders and banks will offer a personal loan in place of a business loan. Get in good by completing the original contract, and a future business loan with the same company will be a cakewalk.
Get The Right Loan
Don’t wait until the last minute to get a loan that can help your business. And don’t rush into an agreement that will do more harm than good. Get the right loan, and let your hard work and dedication do the rest.
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