Obtaining Working Capital with Bad Credit and No Collateral
While the credit market for small business owners in the wake of the great recession has seen traditional loan options evaporate for all but mid to large sized businesses with viable credit, the need for working capital on the part of small businesses outside this range has not gone away. On the contrary, in order for businesses to effectively grow, many will at some point need to take a business loan, bad credit loan alternative or other type of financing. In the case of businesses that are growing but have very little in the way of assets, one option for procuring financing is to leverage their history of sales growth as the main criteria for underwriting a cash advance. Even if the business owner does not have collateral, such as a home or equipment, that they would otherwise use to secure a bad credit loan product, they can use the information contained in their last three months of banks statements to demonstrate to a financing company the profitability and long term viability of their business model.
Business owners who use this type of financing should be aware of how the product is different from a traditional small business loan. For one thing, since the bad credit business loan alternatives they can apply for are unsecured and available despite the risks posed by their credit ratings, they are typically more expensive than small business loans offered by traditional lending institutions. Business owners should plan the use of their capital to avoid wasting the potential of return on investment that comes with it. It is generally better to have a clear vision of how you will invest your capital before you apply, although, since there is not a need for submission of a formal business plan and there is generally no restriction place on how business owners use their funding once it is granted to them, in the event that they are presented with another opportunity after application they are free to pursue it. Offsetting some of the cost associated with bad credit business loan alternatives, the speed with which a business owner can apply for and obtain capital makes it much more convenient to apply for as opposed to a typical loan, which can take months to underwrite and may require much more extensive documentation. Another positive feature of this type of business financing is the opportunity to apply for renewals after each successive round of financing, with terms that get better as a business builds up credit with the financing company. When used to pursue growth opportunities, bad credit business loan alternatives can be a positive tool for small businesses, and the fact that they are able to be obtained with bad credit and no collateral means that for many business owners, these products are the only options that still exist in a credit market that has shifted away from small and medium businesses.
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