Do a search in regards to business loans and bad credit and you will see result after result touting galore way or another where you may fool the banks and lenders into giving you a business loan.
Follow those results and for the most share you will only end up poorer (paying those companies or persons a fee) and still not getting the business loan you want or need.
Banks and lenders use credit histories and credit scores as a time saving measure. You request a loan, they pull your credit. If your credit is bad or under their threshold, they don’t waste anymore time on your deal request and may move on to other deals that have a better probability of getting funded.
I deal with enterprisers every day that complain regarding how their bank or a private lender just won’t look at their deal because they have bad credit. I constantly listen the same thing:
“Why won’t they just look at the merits of my business and not focus so much on my personal credit as it is my business that will be paying the loan back!”
My answer is always the same:
1) That is how the financial markets work, and
2) If you want to get approved based solely on the merits of your business then find the right business loan that focuses only on the merits of your business.
Sounds simple and it in truth is.
Yes, there are business loans (and other types of business financing) that either do not look at your credit at all or if they do, do not place much weight on it (great for those credit scores that are borderline).
Let’s look at three examples:
1) Accounts Receivable (Invoice) Factoring: Your business writes an invoice for goods already shipped or delivered to your client but you have to wait 10, 30, 60 days or more to get paid. Then, factor those invoices and get your cash today so that your business may compensate it is employees, suppliers or to finish that next job.
As your business has already finished the occupation and shipped the goods and is merely just waiting to get paid, the lender has no reason to even consider your credit history. Instead, they focus on the next cash event – which is your client paying you. If your client shows a strong promise to remunerate as agreed, then your loan request must be approved (without pulling your personal credit history).
2) Purchase Order Financing: Your business has already won over the client and you have their occupation order in hand only to realize that your business does not have the cash on hand to buy the materials and labor to finish that order.
Factor that occupation (purchase) order for up to 100% of the cash you need to finish it. When the occupation is done and you gather payment from your customer, you remunerate back the advance and keep the profits to be plowed back into the next deal.
Again, since your business has already demonstrated that it may win business, the focus of this loan approval is not based on your personal credit or the cash position of your company but in the next cash event – when your client receives the finished order and pay you.
3) Business cash Advances: If your business accepts credit card payments from it is customers, then your company could qualify for a business cash advance; based on your company’s capacity to carry on to get clients to buy your goods and services.
Based on past results (your business’s past results and not your personal credit history), your firm could receive a cash advance to be employed as working capital to re-stock inventory, compensate employees, generate new business or whatsoever your business so desires.
And, since repayment of this advance (loan) is based on future cash flow from your credit card paying customers, these lenders are not that concerned with your personal credit scores but more concerned in regards to your business’s capacity to keep getting those paying clients in the door (which is what you wanted – a business loan based on your business results and future potential and not your past credit mistakes).
Now, while Business Cash Advance lenders place the onus of their loan/advance decision on your future cash flow potential, they may still pull your personal credit. The reason is that will have to your business shut down tomorrow, they want to be assured that you will still compensate them back.
But, if your credit score is border line or just a bit under what a traditionalisti lender requires, then a Business Cash Advance just might be the financing kick begin your business needs.
These little business financing choices were designed for businesses and business owners just like you – whether it is bad credit or a lack of cash flow or whatsoever reason a conventional lender states why they declined your loan request.
Thus, if you are one of the numerous that want a lender to focus their loan approval on your business and not on your credit, then seek the right business loan; a loan that has no reason to focus on your credit (as you and your business have already done the work) but focuses more on the merits and wherewithal of your company’s future potential.
So, the ball is in your court. Forget your credit score and get out there and get the business – show these lenders that your business may and has the potential to be something special and then use that potential to get the financing you need.
If bad credit is keeping you back from getting the business loan your company needs, perhaps it is time to step up to the plate and seek a loan that is more concerned when it comes to the abilities of your business and not solely on if you have made a few credit errors in the past.
In the end, it actually doesn’t matter where that capital comes from as it all may be expended the same way – helping you grow your business into the success you recognise it may be.