We make many mistakes as we progress; there is nothing wrong with making mistakes because it is an essential part of learning. However, some mistakes can haunt you later in life, such as financial mistakes. A bad credit history due to inapt financial decisions brings grief to many people later in life.
Financing a business is an uphill battle, but with a bad credit history, it becomes far more challenging. But, despair not! There are ways to find money for your business, even with a checkered credit history.
This blog post shares five non-traditional sources for financing small businesses and startups.
Reach Out to Family and Friends
You can seek loans from family and friends because your relatives may be more willing to lend you money than banks or other financial institutions. For instance, some parents may provide their children loans to help them startup businesses or buy homes. While banks may not approve a loan because of concern over your poor credit, relatives and friends may not dwell on your score as much because they know you more intimately as a person than the financial institutions.
Look Beyond Credit Cards and Bank Loans
Most early-stage companies and business owners, in general, consider bank loans to be the primary source of businesses financing. However, in reality, bank and credit cards account for only about 25% of the funding received by small businesses.
This means that even with a low credit rating, you have many options available other than traditional loans. For example, some banks offer home equity loans and lines of credit with high rates to sub-prime borrowers, who are considered financially risky because their scores aren’t excellent on traditional metrics like payment history or bankruptcy status.
For convenient business credit, you can reach out to organizations like Hughey Enterprises Inc. in Los Angeles, CA.
Small business owners who have accounts receivables can qualify for invoice factoring to help their cash flow. The factoring company advances around 70%-85% of the funds to the business when they send an invoice to their customers. When the business’ customer pays the invoice, the factoring company collects the payment and disburses the remaining balance to the business after deducting their fees.
Microloans are a new way to acquire small business loans. These funds can help you purchase supplies and equipment, fund renovations or expansion projects, etc. Microlenders offer anywhere from $5,000 to $25,000 to borrowers like you.
The SBA has an extensive lending program designed for people who need small amounts of money. Other such microloan sources include Kiva and Accion. These small lenders are often less stringent about your credit score but charge higher interest rates than larger banks. You may be able to find a subsidized microlender in the area that offers more flexible terms since they are not as well known or established.
Not only is this an excellent source of funds, but it will also help you improve your credit. When you make timely payments, it will be reported to the credit bureaus and enhance your history.
Fintech lenders are starting to make inroads into traditional banking. They cater to borrowers with bad credit; these companies typically have different requirements than the conventional lending institutions.
Businesses in Los Angeles and across the USA can reach out to Hughey Enterprises Inc. for a minimum of $50,000 in business credit without a social security number or a personal guarantee!