Have you ever noticed that the better your credit, the easier it is to get a merchant business loan from your bank? What happens, though, when your credit has been damaged? There will be times when your business credit score the lending climate makes it difficult to get credit when you most need it. That’s the time to get creative and find out what your alternative is to conventional lending.
Friends and Family
Your bank is going to care that you have bad credit, but your family and friends may still believe in your vision and want to invest in your company. They are one source of funds that can’t be ignored. Just be careful to repay them on time or it can cause friction between people you value in your life.
Merchant Cash Advances
This form of alternative lending doesn’t put your family relations at risk. You can borrow from a private lender who will use your future credit card receivables to set up an automatic repayment plan. Even if you have bad credit, it won’t be counted against you if you can prove you have the ability to repay the loan via future sales. You pay only a percentage of every credit card sale to the lender, making your repayment schedule flexible with the amount of cash you receive each month.
Collateral Lending
If you still want to work with the banks, they will ask for large amounts of collateral to make sure they don’t lose on the deal. They will also give you higher interest rates if your business credit is poor. Collateral can be hard to find in situations where you want the loan for capital improvements because your equipment or location needs to be upgraded. However, if you do have collateral in the form of real estate, cash, bonds, or stocks, you can still get some lending from a conventional lender.
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