You are currently viewing How to get a business loan with bad credit?

How to get a business loan with bad credit?

Companies go through rough patches, bad credit history can cause issues that will slow down your business growth. Nowadays, the credit score system is an important criteria when trying to access funds for your small business. Even your personal credit score can have a negative impact on your journey for business financing. As a result, it can be really hard to get a business loan with bad credit.

Fortunately, alternative business financing options exist. We’ll dive into the different types of poor credit loans that get your approved for the capital you need, even with bad credit.

Types of business loan with bad credit

When your bad credit is causing you difficulties and holding you back from sourcing capital, there are alternative options that bypass and disregard the defining credit evaluation. We’ve highlighted some of these options that can match your business’ needs of funds.

Merchant Cash Advance

A merchant cash advance is a flexible financing solution based on your credit card sales, rather than your credit score. With a business cash advance, you receive an upfront amount of cash that you repay with a fixed percentage of your future daily credit card sales. If you want to know more about cash advances, you can check our simple guide that explains how a business cash advance work.

Business Loans with Collateral

A secured loan can be a good alternative if you have trouble to get approved because of bad credit. It requires you to pledge some kind of collateral, usually an asset that you own. If you are considering a secured business loan it’s critical that you negotiate the conditions with your lenders, such as the asset’s valuation, the risks associated, and what happens if you can’t meet your repayment deadlines.

Government Funding

The government of Canada helps small businesses get the capital they need with the Canada Small Business Financing Program (SBFP). The program makes it easier for small business to get loans from financial institutions by sharing the risk with lenders. Besides, most of businesses with a revenue of $10 millions or less are eligible.

Alternative Lenders

If you’re having troubled to get approved by traditional organisations (i.e. banks), you should consider alternative lenders. You can find many private lenders that will get you the funding you need. That’s because most of the time, they don’t take your credit score into consideration. As a result, the process is quicker, and approval rates are higher.

How to improve your business credit score?

While there are many options for bad credit business loans in Canada, there are ways to rebuild your credit score. In fact, bad credit doesn’t have to be a permanent situation. You can find below some strategies you can use to improve your credit score over time.

Meet repayments deadlines

One of the most (or the most!) important thing to take into consideration when trying to improve your business credit score. Non-repayment can have a huge impact on both your credit score and your relationship with suppliers/creditors.

It’s important to keep track of all your repayment deadlines. You can use reminders or even have automatic payments when necessary. In situation where you can’t meet deadlines, payback your most important invoice. Some credit agencies have a dollar-weighted process when calculating your credit score.

Pay your bills upfront when possible

Some creditors will give you the possibility to pay upfront. If your business have the resources, you should definitely do it as it will positively impact your credit score, and contribute to good relationship with your suppliers. Besides, some vendors offer discounts for orders paid upfront, or before the due date.

In cases where it’s difficult for you to pre-pay bills, it’s important that you negotiate good terms with your creditors. This way, you will have more time to consolidate your cash flow.

Get business loan with bad credit

In some cases, getting a loan that you can easily repay can be a good solution. Over time, easy repayments will translate into an improved credit score. On top of that, you can use this new credit to repay part or what’s left of a previous credit.

It’s important to consider you current situation before choosing this option. If your business is already under a lot of credit pressure, adding even more can be a risky business.

Apply for our Bad Credit Business Loan

As you can see, solutions exist when you are looking for a business loan with bad credit. At Just Capital, we offer different business financing options with no credit check, and no collateral, such as merchant cash advance.

We also have bad credit business loan, a business financing specifically designed for business with bad credit. Because we believe that poor credit shouldn’t keep you away from the capital you need to grow your business.