As a business owner, having bad credit (whether personal or for your company) is a catch-22. It’s hard to grow faster without financing, but it’s just as difficult to get approved because of your credit score. While bad credit financing is generally more expensive, there are some options that may help you get the capital infusion you need. Here are five types of financing to consider, along with the pros and cons of each one.
Get a lump sum of working capital with a fast repayment time. This can help you grow your business credit while also borrowing a small amount to help you with near-term needs. Naleu’s network of online lenders offer easy online applications and fast approval times.
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Rather than receiving a lump sum of money, a business line of credit gives you access to an account you can draw on as you need extra funds for your company. You’re charged interest on your outstanding balance and pay down your debt just as you would with a credit card.
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With a merchant cash advance, your business receives an upfront payment and subsequently makes automatic payments as a percentage of your credit and debit card sales. Rather than interest, you’re charged a factor rate, which is a multiple of the amount you borrow.
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Invoice factoring is similar to merchant cash advances in that it’s based on future revenue. With this type of financing, however, you get an advance on a portion of your business’s outstanding invoices. The lender charges a service fee as well as interest until your clients pay the invoices. Then you receive the remaining funds.
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It’s possible to find equipment financing companies that work with small businesses who have bad credit. Part of the reason is because the equipment is used as collateral so if you default on the loan, the lender can simply repossess the property. You may also be able to find options available for new businesses.
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Even with bad credit, it’s possible to find lending opportunities for your company’s specific needs.
Explore small business financing solutions with Naleu.
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