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Owning and managing a small business is one tough job. You’re like the proverbial juggler trying to keep numerous balls in the air while making the whole show run smoothly. Meanwhile money is tight and your cash flow is uneven. If things don’t go your way, you can wind up with bad credit. If that has happened to you, there is still hope. Bad credit small business loans do exist. And they may be just the thing to help reverse your business fortunes.

First of all, are you sure about your “bad credit” status? Or are you just making an assumption? Perhaps you applied for a small business loan from a bank recently, and they turned you down. That may not mean much. Unfortunately, being turned down by banks is pretty normal for small businesses. It doesn’t necessarily mean bad credit business loans are your only option. Maybe you simply need our small business lending team here at United Capital Source (UCS) to point you in another more viable direction.

Today, there are numerous loan types and lenders just right for small businesses like yours. Even if you really do have bad credit. So let’s talk about that. Because there is no reason to let bad credit keep you from getting the business loans you need to expand.

BECOME A BUSINESS CREDIT AFICIONADO

OK, maybe “aficionado” is an overstatement. But, seriously, here at United Capital Source we meet many small business owners who don’t know how business credit works. That makes it all too easy to develop bad credit. I want to help you learn, so you can avoid making these mistakes. You can avoid bad credit and build your business faster.

Many small business owners don’t realize their business has a credit score. It is based on your company’s borrowing and repayment history. But it is also based on your debt load and other risk factors. Some lenders (banks, especially) will also look at your personal credit score if you apply for a business loan. They see you as a “credit representative” of your business.

We always advise small business owners to keep their personal and business finances separate. If your personal credit isn’t that great, this is even more important. Work to improve both credit scores. And consider incorporating your business.

Bad credit can hurt your business in many ways. Yes, it’s harder to qualify for business loans. But your business credit score is not confidential. That means prospective customers, vendors or others can check up on you. If they see your credit is iffy, they may not want to do business with you. That could really damage your expansion plans.

TYPES OF BAD CREDIT SMALL BUSINESS LOANS

Your business credit score is very important to banks and other traditional financial institutions. Maybe your personal credit score, too. So obviously they are not an option for bad credit business loans. Where can you turn instead? You have multiple options.

Expanding your business requires more inventory. You can borrow money to acquire new inventory. You can also use existing inventory as collateral to borrow money for some other purpose. At UCS we can match you with the right inventory financing, even if you have bad credit. We can do it quickly, without a lot of fuss.

If you make regular bank deposits, you can borrow against that income. A small percentage is automatically deducted from each deposit.

Merchant cash advance is similar. You get the money you need up front, then repayment is automatically deducted from future credit card sales. Sometimes you can arrange fixed monthly payments instead.

Friends or family members may be willing to loan you business money despite your poor credit. If so, use a loan management company to handle the details. They can report your repayment history to business credit bureaus. That way this loan will help rebuild your credit score.

Even with bad credit, you can get a business credit card. The interest rate will be higher, but the key is to not use the credit unless you need the money, then repay it right away.

If you’re a woman-owned or minority small business with bad credit, there are special funding options just for you. That includes Small Business Administration programs and a number of alternative micro-lenders. You don’t have to be a woman or minority to be eligible for a micro loan.

Short-term business loans can be a good choice when you need larger amounts of money. They can be great credit boosters because you pay them off quickly. You can show you satisfied the loan agreement in a few months, instead of waiting years. Never borrow more than you need, because that drags out your repayment time (you’ll pay more in interest, too).

With peer-to-peer financing, an individual investor lends your business money. The business loan is unsecured.

Look for funding options that tie repayment to your income. That way it’s easier to make payments on time. At UCS, we offer options from daily to monthly payments. Or you can repay a percentage of your transactions.

You may be able to find a business credit partner. This would be someone who has solid personal and/or business credit. Their great credit helps offset your bad credit. They co-sign your business loan, but that does not appear on their personal credit report.

Some in the lending industry would also list home equity loans as an option if you have bad business credit. While that may be technically true, it is a huge risk. If your business cannot repay, you and your family could lose your home. Our bad credit business loan experts at UCS can help you find a much better option.

Entrepreneur says, “The trick is to fund your business in ways that actually get your score back on track so when you’re ready to move your business to the next stage, your score will start opening doors rather than getting them slammed in your face.”

MEANWHILE, WORK TO BOOST YOUR CREDIT

I know it’s a huge relief to know you can find bad credit small business loans. But while you’re putting that money to good use, I want you to focus on rebuilding your business credit. That way, your UCS account rep can help you find even better financing options in the future. With better credit, you’ll be eligible for more loans. You’ll get lower interest rates. Or better repayment terms. You’ll be able to worry less, and expand more. We’ll be right there by your side, cheering.

As I noted in an earlier blog article, getting the right small business loan can help repair your credit. You get the money you need now to expand your business. And you get a chance to show the lender you can repay as agreed. You’re starting to rack up credit positives. Over time, they will overshadow your credit negatives. And voilà – you have morphed into a small business with good credit.

PRIORITY #1: REPAY ON TIME FROM NOW ON

If you can’t make new payments, you’ll sink deeper in debt. And your credit score will get worse. This is why it’s so important to find the bad credit business loans that will work for you. Better yet, prepay if you can. Vendors may give you a discount, so you’ll save in the long run. And they may serve as credit references for you. Prepaying also reduces your debt-to-equity ratio.

Not all types of merchant financing are consider business “loans.” So lenders don’t always report payment information to the business credit reporting agencies. Ask which agencies your lenders report to. Ask what information they report. If they aren’t reporting for you, ask them to do that.

The same goes for your vendors. If they’re giving you payment terms, be sure they report your payments. Be aware that 30-day net terms can indicate lack of confidence in you. Sixty- or 90-day net looks better on your business credit report.

DON’T OVERUSE YOUR BUSINESS CREDIT

You may have a business credit card. Or a business line of credit. Don’t run them up to the limit. Take money only when you need it, and repay it right away to avoid interest. Use business credit cards for things like regular monthly expenses, paying vendors and so on. That helps show you can responsibly manage your money.

GET PROFESSIONAL HELP

As a small business owner, you’re often the resident expert on everything. Product development. Customer relations. Accounting and finance. Sales and marketing. But you aren’t really an expert in all those areas. That’s why it’s so important to create an advisory team that bolsters your expertise. You can also access excellent business management assistance from the SBA’s SCORE program. That stands for Service Corps of Retired Executives. It’s free – your tax dollars at work to help your business grow and thrive.

There are SCORE volunteers near you who are seasoned business veterans in your industry. They can help with planning and budgeting or any other aspect of growing your business.

UCS can help you on the finance side, of course. Because you have a dedicated account rep, they get to know your business inside out before they make any recommendations about funding options. That way, they can help you explore and weigh all your options. You can see how bad credit business loans will help your business right now. And you can learn what other types of funding can help you manage your business finances in the future.

Priyanka Prakash at FitSmallBusiness suggests using a good credit repair service to help improve your credit score. Especially if there are errors on your business credit report. He says you should review your business credit report each year. A good business credit score can help you:

  • Qualify for new financing at lower rates
  • Get better terms from suppliers
  • Reduce or eliminate the need to use your personal credit score to qualify for business loans

DON’T WAIT ‘TIL IT’S TOO LATE

Don’t let your business go out of business because you didn’t know how to repair your credit. And don’t wait until you’re drowning to call us at UCS. Let’s talk now, while our team can help you turn things around. That way, you can grow and thrive. There is no shame in borrowing money for your small business. It’s a perfectly normal way to expand. And it’s an excellent way to boost your business credit score.

A bad credit business loan is not a consolation prize. It’s a chance at a new beginning for your small business. Take advantage of that opportunity. Restore your credit. And you’ll be able to expand beyond your wildest dreams.

At UCS, we don’t work with brand new start-ups. But I have some advice for you budding or would-be entrepreneurs. Follow all the tips we’ve presented here for building good business credit. Do that right from Day One. That way, you won’t have to worry about bad credit keeping you from getting the small business loans you need.

And keep United Capital Source in mind. Because every small business needs extra money from time to time. Once you’ve been in business six months or so, you can team up with us. We’ll help you grow with the right financing products and programs. And we’ll revel in your success.

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