Prior to the emergence of alternative business financing, small business loans were nearly an impossibility for applicants with bad credit. A less than perfect score was a surefire recipe for rejection, even with strong sales. But these days are long gone, largely because it eventually became clear that bad credit was not an indication of poor income or an irresponsible business owner. In certain industries, maintaining perfect credit is especially difficult. If you sell high priced products or use expensive equipment, for example, it’s easy to borrow too much. Now you’re faced with monthly payments you can’t afford.
You might have run up the balances of your business line of credit or credit cards to help with these payments or take care of numerous emergency repairs. With some beauty spas, bad credit comes down to erratic cash flow caused by inefficient use of space or staff. The point is, you’ve fallen behind on your dues.
Make Sure Bad Credit Is What’s Holding You Back
It’s only natural to assume that applicants with bad credit should have to jump through more hoops than usual to obtain business funding. This is both true and untrue. The first step is to make sure that bad personal credit is the only thing or most important thing holding you back. Applicants with poor or little credit history are sometimes surprised to learn that it’s their business credit that led to their rejection. It’s up to your suppliers to report your timely payments to accredited bureaus, though this isn’t always done correctly. And a personal credit score can be raised dramatically in a matter of months, whereas raising a business credit score takes time.
If you determine that your credit is what’s hurting you most, then your next move is to explore ways to fix it. This needs to be done before you contact a business lender, even one that offers special business loans for applicants with bad credit. A good starting point is cutting back on expenses, which gives you more working capital. Though you might not be able to pay all of your outstanding bills on time, it’s probably a smart idea to pay off the largest invoices first and submit trade references to these clients. You might be tempted to get rid of your credit cards altogether but this would most likely be a mistake. Using your credit cards sparingly and paying off the balances quickly improves your credit profile more effectively than canceling them.
Consider Merchant Cash Advance
Your research may very well lead you to conclusion that a small business loan is the best way to consolidate your debts. The terms of a standard term loan, however, might not mesh well with your erratic cash flow. And your chances of approval will be slim. But a merchant cash advance doesn’t require tight cash flow or flawless credit. This type of working capital loan is ideal for beauty spas because they typically perform consistent debit and/or credit card sales. Unlike other small business loans, you can spend your money right away and not have to pay the majority of it back until cash flow becomes stable again.
Merchant cash advances are also fabulous tools for financing inventory, which is a huge headache for dozens of industries. Beauty spas sell products to augment their income from spa services and create a separate revenue stream for growth-related initiatives. If you are introducing a new line of merchandise, you are going to want to order a lot of inventory. Showing that you are taking new measures to improve your credit and cash flow looks very impressive to business lenders. And since a merchant cash advance is so easy to pay back, you will likely be approved for a second round of funding shortly after paying back most of the first round in full. This will come in handy if your busy season is approaching, or you want to expand your inventory even further. For beauty spas, there is always some other item they could be selling, from skin care products to branded spa robes.
Get Advice From The Right People
Arguably the most important step in getting a bad credit business loan is surrounding yourself with the right people. You can tell you have done just that when your business lender acts quickly to fix your problems, and offers multiple solutions for the future. At United Capital Source, we are not only experts in business financing but building credit as well. It’s safe to say that you probably wouldn’t have credit problems if you listened to the right people in the past.
We have worked with borrowers who had bad credit for a multitude of reasons. And yet we were able to find a solution every time. So, rest assured that the small business loan we recommend for you will also be the most beneficial for your personal or business credit situation. There are other alternative business lenders that can quickly approve funding for applicants with bad credit. But United Capital Source is among the very few that can do this with special business funding programs designed to help you raise credit, pay off outstanding debts, and improve cash flow simultaneously.