Bad Credit Business Loans and the Importance of Funding for Main Street
Business loan volume is an important indicator of economic health and recovery. Small businesses, as one of the major forces of job creation and employment in the US, need capital in order to effectively grow and pursue larger opportunities. It follows that the more capital they are able to obtain when they need it, the more robust sign of positive economic activity. However, a trend of small business loans increasingly going to businesses only on the largest and most developed end of the spectrum has been reported on in multiple business journals, including in a recent Forbes article where it was cited that 42% of small business owners seeking small business loans were denied by traditional banks, and small and micro business lending are both down, although big business lending is up.
Bad credit business loans are providing some options. The growth of bad credit business loan alternatives in response to the dearth of readily available capital can be seen as a natural reaction to the credit crunch. In particular, businesses that require expedited access to funding as well as those businesses whose owners suffer from financial issues, including bad credit are the most likely to use these options. While the cost of the financing is higher than a traditional loan due to the higher levels of risk, the fact that almost any business can successfully apply makes these bad credit business financing options valuable in the right circumstances. The nature of their underwriting, which is adapted for the nature of the clientele is more heavily based on monthly sales volume than a good or bad credit score, which means that otherwise healthy enterprises are not excluded from funding based on a single variable.
The unrestricted nature of this small business financing allows it to be used for many purposes. There are many ways to expand a small business, whether it is making improvements to processes, products or production, many business owners find it helpful to have a fast option should they need to finance business growth quickly, One example of small businesses financing growth with alternative capital is in order to purchase more inventory when a larger than usual order comes in, although the potential uses are as varied as the businesses that use them. While bad credit business loan alternatives are not fully able to fix the issues caused by the credit crunch, they at least provide another option to small business owners struggling to grow in a tough economic situation.
Photo Credit to Phillip Capper on Flickr