While the small business lending landscape has been steadily improving over the past year, challenges still remain, particularly for companies that have less than stellar credit histories. Many banks are not willing to provide capital to small business owners who have below average credit scores.
There can be valid reasons why a company might have a poor credit history. During the Great Recession of 2009-10, many small businesses fell behind in payments to vendors or simply could not correct their cash flow issues quickly enough. After all, the hardest time to secure credit is when you are desperate for it.
Fortunately, there are lenders who are willing to take chances on a small business owner who may have run into some short-term financial problems and startup companies that have no credit history whatsoever. However, remember the lenders are usually not "brand names" in the financial services industry; and the interest rates and fees can sometimes be higher than those offered by traditional banks.
Here are some financing options available to business owners with lower than average credit scores. Merchant Cash Advance is a short-term loan paid in a lump sum to a business owner in exchange for a portion of a company's future credit-card sales. Companies involved in this type of financing offer quick access to cash without requiring excellent credit or substantial collateral.
Some cash advance companies will approve funding requests and forward money in as little as 48 hours. Interest rates are often a bit higher than what traditional lenders charge, however. Business Credit Cards can provide business owners with poor credit histories access to debt financing. Opening a credit rebuilding credit card is one of the best ways for a business owner to repair previous credit damage.