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.
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