In the small-business world, having a strong credit history is crucial. Obtaining a loan without good credit can be difficult, but you probably already know that if you are visiting this page. Never fear—there are ways to secure small business loans, even with less-than-stellar credit history, and fund your small business! Read on to find out how.
1. Contact The Small Business Administration
The SBA has all the inside information when it comes to small business lending. The SBA has several loan programs whose sole purpose is to help small business entrepreneurs secure small business loans. However, do be aware that there are some credit profile requirements that you must meet in order to qualify for one of these programs. If you do not qualify for any, consider exploring small business financing from alternative sources.
2. Secure A Small Business Loan With Assets
When you secure a loan using assets, the lender can seize and sell the assets to obtain repayment if you are unable to pay back the loan. Because of the additional security provided, some lenders might be more comfortable lending you money this way. So if your small business has equipment or property, they might be able to help you secure a small business loan.
In addition, you can also use personal assets to secure financing. The most common assets used are homes or vehicles, but proceed with caution: if you default on the loan, you will lose your home. Ensure that you understand your lenders’ rights before going down this road.
3. Try Peer-to-Peer Lending or Alternative Lending
If you simply cannot find any lenders that are willing to offer you a small business loan, how about approaching your friends and family for a personal loan instead? They might be able to offer you more favorable loan terms than other lenders would.
There is also alternative lending. You can find non-traditional lending agencies that actually specialize in loaning to those with bad credit. Merchant cash advances, invoice financing, equipment financing, and purchase order financing are all great alternatives to explore. Be aware, however, that non-traditional lenders might make you pay higher interest rates on bad credit loans.
4. Investigate Government Grants
There are some government grants out there which offer free money to small businesses. Visit grants.gov to research what types of grants are available. This is quite competitive, though, so have a good business plan in order to be a strong candidate.
This article was submitted by Megan Zhang, freelance blogger and writer. She lives in New York City. Send all questions to firstname.lastname@example.org