How to Approach Obtaining a Bad Credit Business Loan Alternative

by / Tuesday, 03 June 2014 / Published in Bad Credit Business Loans

bad credit business financing


Bad credit business loan alternatives allow small business owners with poor credit scores to gain access to capital, but work differently than traditional loans. While these products can help businesses by providing financing where they would otherwise not be able to get it, the costs are higher than a typical loan and can vary greatly depending on the company, the credit and sales strength of the applicant and the number of times they have taken out an advance. In order to make sure that a business owner’s application goes through with the highest chance of being funded, they should be aware of a few important aspects of their business that they should get in order first.

Research the companies you are considering. Just like a traditional bank, providers of business loan alternatives come in many sizes and some will naturally be disposed to work with greater or lower levels of risk. The higher the perceived risk on the part of the business applying for financing, the higher the relative cost will be. One of the ways that business owners can mitigate this issue is through choosing a company that is willing to offer them better terms after their first advance, creating the basis of a relationship. If there seems like there is no chance that you can continue working with a company, that can be a red flag.

See what you can get approved for. During due diligence, bad credit business loan alternatives are calibrated mostly depending on the sales history reflected in a business’s monthly deposits. Positive signs include a month by month increase in sales volume, payment of major bills, and years, as opposed to months in business. That being said, the business owners who need fast access to capital the most may be newer and in the process of growth. It is recommended that these business owners see what they can get approved for, then compare and contrast offers. Some capital providers are willing to fund what is called a second position advance, allowing business owners to get more capital in the event that a single approval does not cover their needs.

Have a plan for the use of the financing. A bad credit business loan alternative usually has a relatively short payback period when compared with a traditional bank loan. For this reason, business owners should have a plan in place to quickly turn around their capital and put it to work for them. Not only is it in their best interest to set up a productive use of their financing, but it will help them get a larger approval if they choose to renew should their investments result in higher sales.

Photo Credit to zack Mccarthy on Flickr

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