Credit comes from a Latin word that translates to 'believe'. It involves two parties, the lender and the borrower. It basically gives the lender information about your borrowing history from your credit reports. A credit report is a compilation of data showing when and how much you have borrowed and much you have repaid or are in debt. Credit scores are the biggest factor for many lending and financing decisions. Bad credit small business loans tend to have a bad rep, but they provide an important link in the chain of lending for lots of businesses. What is a Credit Score? A credit report provides potential lenders with a thorough overview of how diligently you have repaid your debts. The higher the score, the more likely it is that a bank will offer you a line of credit, knowing that your previous debt obligations have been taken care of in a timely manner. If you miss a payment or default on a loan, your credit score will likely drop, making it tougher to secure funding in the future. This can put small businesses in a tough spot, making it a lot harder for them to secure financing necessary for growth. Impact of Bad Credit business loans Credit scores are similar to a school Grade Paint Average, in that it follows your overall progress. and provides an easily understandable look at a person's creditworthiness. High credit scores make it much easier to obtain a loan or financing for your small business. Bad credit it make it a lot tougher to secure a loan from a bank or credit union. Fortunately there are opportunities for small businesses to secure funding, and that allow all businesses the chance to grow through financing. Here are some financing options for you if you have a bad credit:
- Business Credit Card – These are the most common form of financing. Qualification for credit cards rely on traditional credit checks and banking institution's rules and regulations.
- Microloans – These tend to be non-governmental organizations (NGOs) that offer small loans to traditionally marginalized groups like small business owned by minorities or women. Their requirements are typically more lenient than traditional loans, but may only be available for special organizations.
- Small Business Merchant Cash Advances – Companies like BCBL offer a small business loans in just days (or sometimes even hours) with a small amount of paperwork. Checking credit scores or offering collateral is generally not necessary, as these are based on your daily sales and not your credit history, opening them up to a wider audience.