Bad Credit Business Financing: Funding Options without Collateral

business loans for bad credit

The “credit crunch” that has seen many traditional small business lending programs increase their underwriting criteria means that for many business owners, bad credit business loans are no longer a reliable or readily available option for financing their expansion. One of the biggest obstacles surrounding their applications is a lack of acceptable collateral to use as backing for the funding issued by their banks of choice. Collateral can take the form of a cash percentage of the business loan, a piece or multiple pieces of valuable equipment, such as a truck, a bulldozer or a specialty oven, or a piece of property such as a business or residential location. The problem is that many business owners either don’t have sufficient collateral to match the amounts they are looking for, or if they do, don’t feel comfortable signing an agreement with the possibility that they could lose their assets in a worst case scenario. A lot don’t know that there are alternatives that exist that can get them funding without collateral, which, when used wisely, can have a great impact on their growth. Here’s some information on these options.

Alternatives to bad credit business loans usually don’t require collateral. These products, called merchant cash advances, typically don’t require collateral in order to be applied for and used to fund business initiatives. Since they place most of their importance on the strength of a business’s sales, credit and collateral take a backseat when determining if a business owner will be eligible, making them an increasingly popular option for business owners who don’t have traction applying with traditional lenders. While business owners with bad credit in particular often use this type of funding in lieu of business loans, even business owners with good credit choose them at times because they don’t want to put up collateral or need capital on an expedited basis.

These bad credit business financing tools should be used responsibly. Business owners are usually attracted to these options because of the more lenient requirements, but are often pleasantly surprised to learn that many providers of merchant cash advance emphasize a relationship based approach to funding their clients. What this means is that usually an initial approval amount will anticipate a better deal after each renewal, providing incentive for both the funding company and the merchant in question to preserve the relationship. In fact, making sure that the company you are going to work with is interested in a relationship is probably a good idea is you are planning on investigating these options.

Photo Credit to Dan Moyle on Flickr

Leave a Reply

TOP css.php