Getting Financing For Your Small Business Even If You Have Bad Credit

Running a business of your own is a dream for many people, but it can be tough to turn that dream into a reality if you have a poor personal credit history. Don't assume there is no way to get the financing your business needs, though! You have several viable alternatives to traditional bank financing.

Credit Partnerships

Probably the most flexible and effective way to get the credit your business needs is by partnering up with someone who has a better credit history than you. You will need a trustworthy individual who is willing to assume some risk in order for this to work, but the advantages to your business are enormous. A reliable credit partner can enable you to access a range of different financing options that would otherwise be unavailable to you.

If you have a prospective partner who is risk-averse, consider asking them to cosign with you in order to open up business credit cards. This gives your company access to an unsecured line of credit which will not affect your partner's credit history unless you end up defaulting on the cards.

Business Cash Advance

This is an excellent way to secure a quick cash infusion if you have a retail business that enjoys a fairly steady influx of credit card sales. A merchant advance is similar to an ordinary loan, but it is repaid by turning over a fixed portion of your income to the lender until your debt is repaid. Repayment details vary between providers. Some offer you a fixed monthly payment while others take a set percentage of your credit card income on a daily basis.

The potential drawbacks of business cash advances lie primarily in their steep interest charges. Some lenders offer rates as low as 12 percent to businesses with a strong cash flow, while other advances may feature rates as high as 40 percent. Note that lenders who offer this form of financing will typically need to see a verified history of your business's income to determine how much they're willing to lend.

Revenue-Based Loans

A revenue-based loan is a more traditional option for businesses suffering credit issues that still have a strong long-term performance record. As their name suggests, these types of loans are secured by the income your business takes in. Revenue-based loans typically come from the bank you are already doing business with. Most banks will be willing to loan you up to 10 percent of the amount you have deposited in the last year without requiring a credit check.

These loans do feature slightly higher interest rates than traditional ones, but they are not exceptionally high. Most banks arrange to automatically withdraw repayment from your account on a daily, weekly, or monthly basis. Revenue-based loans typically feature terms of up to 18 months. One final advantage of these loans is that they are easy to set up. Most banks will provide you with this type of funding in seven days or less.

While it takes hard work and careful research, it is far from impossible to secure business financing even when you have a spotty credit record. The options presented here are just some of the most common ones. Further investigation may open up highly promising financing opportunities that will give you business the cash infusion it needs.

JD Stratis is debt-reduction specialist and a successful business operator. He owns a site, <a href="http://www.willowbrookcredit.ca/">WillowbrookCredit.ca</a> which is dedicated to finding solutions for people who are experiencing credit problems.