• New Wave Accountants

Ways to Get Financing for Your Business If You Have Poor Credit

Your credit score might not be as high as you'd like if you've missed payments in the past or if you owe a lot of money. Having bad credit might be challenging when trying to convince lenders that you can pay them back over time.


Though some businesses offer bad credit financing, you might still find it challenging to get a loan. Be wary of applying for loans because you could easily damage your credit. It determines how much money you'll get and how much interest you'll have to pay on the loan.


Poor credit makes it harder to qualify for a business loan from a traditional bank. For maximum flexibility and options in getting financing, you should look for a small, independent business lender with a wide range of programs to work with different types of businesses.


While there are many options, here are five ways to get finance even with poor credit:


1. Minority Businesses


If you're a member of a minority group, your business has better access to financing because you qualify for certain benefits. The decision about which type of company you set up and how you structure it depends on what kind of minority group you belong to and the discrimination you've been facing if any.


Qualified minority businesses enjoy all the advantages of typical companies but with better financing options and other business-related benefits. The disadvantage is that you still have to qualify.


2. Angel Investors


An angel investor is an affluent person who provides investment capital to businesses with high growth potential. Angel investors are usually interested in helping you get started because they have a personal interest in your company's success. In return, they receive an ownership stake in your company, considered a tax benefit.


Some are willing to help with financing if you don't meet conventional lending requirements. Angel investors usually provide their funding to get your business on its feet, and they expect a return on their investment in the form of an equity stake in your company.


3. Start-up Financing


For start-up financing, you can borrow money from friends or family or get funding from a lender who usually wants you to pay it back as soon as possible. The downside to this type of financing is that you might need to be personally liable for the loan.


If the business fails, the lender can pursue your assets for repayment. It is also a good idea to make a formal legal agreement with the lenders and have a secure, binding legal document signed to protect you and your lenders.


4. Factoring


For businesses that need fast money, factoring can help you get the cash you need. It is a form of financing where you sell your debtor's right to your invoices. This type of financing is helpful if you're struggling to get paid in full by your clients on time.


Your business can borrow against the money you already have coming in. It can help you stay focused on your company because you don't need to spend time and energy chasing down payment. You can also use the money for expansion because you can put it toward developing a new product or into your marketing plan.


However, you'll be required to pay back the borrowed money on time, with interest.


Conclusion


Credit represents the borrower's financial strength and can be a deciding factor for getting a loan. Banks are reluctant to offer credit to borrowers with poor credit ratings. There are still ways you can get financing for your business, even with a poor credit rating.


You should have good accounting when you have been granted credit for following one of the ways this article has presented. It is important to have better accountability for what you’ve received.


If you need the best accountants in Gold Coast that are cost-effective, New Wave Accounting is the best for you! We provide end-to-end accounting and bookkeeping services that help scale & grow businesses. Contact us now!



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