One of the very first steps towards starting a successful small business is attaining equipment financing. But who among us has enough cash on hand to purchase machinery? In most cases, small business owners must take a loan.
Having poor credit immediately cripples your chances of convincing a bank to dish money in your direction. Large banks will generally not help finance your small business if you have a subpar credit history. Luckily, ways to obtain the money you need to finance your equipment. Statistically, bank loans only account for 25% of all funding in small businesses. Here are some other sources worth considering:
Instead of a large bank, nonprofit organizations serving as intermediaries loan out small lump sums of cash. With the average microloan being about $13,000, these nonprofit groups can provide a good source of funding for small businesses with poor or no credit score. Although their interest rates tend to be higher, microloans are more readily acquired than bank loans. These loans also provide a method of rebuilding a low credit score.
2. Merchant Cash Advance
Cash advance providers offer a method of supplying you cash in return for future sales. They provide money for business with poor credit score and no collateral, but usually come tagged with a hefty interest rate and relatively short time span to pay back. Make sure to shop around to find the best possible rates. Biz2Credit can help you find the best deal.
3. Business Credit Cards
This is a good option for business owners to start rebuilding a poor credit score and to attain access to debt financing. Stay on top of your bills and make sure to pay them each month—ahead of time, if possible!
4. Improve Your Credit Score
This obviously takes time, but there are many ways to repair your damaged credit score. Keep tabs on the state of your credit history; there are many credit ratings agencies at your disposal. Make a habit of paying bills ahead of time, and be cautious to not mix business credit cards with personal credit cards. Do not make the mistake of opening too many credit accounts, assuming that this will increase available credit. It is a far better idea to have one credit card and pay it off completely every single month.