If you’ve previously suffered from adverse credit, then it can be difficult to raise additional finance for your business through a bank. The good news is that there are options available to you that could allow you to get access to the funds quickly and with a minimal amount of fuss.
There are a lot of different routes available when it comes to getting funding for your small business, so don’t panic if the bank has said no due to your credit history. The business loan market continues to grow and more and more lenders are beginning to understand and take steps to meet the need for poor credit business loans. After all, a few financial mistakes in the past shouldn’t affect your ability to start a business in the future. So, what are your options? Here are some choices that you might want to consider.
Unsecured Business Loans:
Unsecured business loans only used to be available from big banks, but that has all changed these days with a wide range of specialist lenders, such as peer to peer lenders, entering the market. As long as the loan is considered affordable, an unsecured loan can be arranged for most businesses – regardless of credit rating.
Asset finance is an ideal option for companies that have a large number of assets in their name but are struggling for capital. Asset finance can be used to raise funds against current assets or to purchase new ones. Since the asset is taken as security for the loan, bad credit is usually more likely to be considered here as the risk is lower for the lender, which increases the chance of the application being accepted.
Invoice finance is another popular option used by businesses with a poor credit history. If the business is currently owed a lot of money via invoices at any one time, there’s a high chance that they will quality for invoice finance. Once this type of finance is arranged, the lender will release a high percentage of any acceptable invoice issued as soon as it’s raised, helping to ease business cash flow.
Merchant Cash Advance:
This is an ideal option for businesses that take large amounts of money through a card terminal. It allows you to raise money quickly and the lender is repaid easily by automatically taking a set percentage off each future sale.
Will I Pay More Due to Adverse Credit?
Getting approved for a line of credit is possible even when your credit score isn’t great but bear in mind that it will often come at a slightly higher rate in comparison to a business with a strong credit history. How much will depend on a number of factors including the type of product chosen and the security that is offered to the lender. Unsecured loans offer little security and, therefore, tend to have increased rates, while other options such as asset finance tend to be cheaper due to a high level of security offered to the lender.
Which of these options is best for your business?