As a small business owner, you have probably heard this saying on numerous, mostly unasked-for occasions: beginnings are the hardest. It is hard to be a small business owner, and it is even harder to get a bank loan. To complicate things even further, it turns out that it’s easier for larger businesses to access funding than it is for small ones. How is such a thing possible? After all, it is the little ones that might, in fact, need the most help to grow – isn’t it?
This contradiction might make a Winnipeg marketing firms owners feel uncomfortable, and discouraged. But there is a way a small business can create the right opportunities for itself. And, you can do that even if you have bad credit.
If taking care of improving your business credit score is always a good idea and a great long-term strategy, then knowing what your best options are when having a bad credit, but still needing that extra financial support, is just as important.
So, here are some solutions.
A great way to get bank funding when your business credit score is low is to switch your focus towards revenue-based financing (RBF). Based on regular monthly bank deposits, this form of financing can be the best opportunity for you.
A revenue-based loan implies that you will have to pay a small percentage of your future revenues to your lender, via a monthly payment. The major difference between a revenue-based loan and a regular one is that there are no fixed payments, no set interest rate, and no set time for repayment. Instead, the monthly payment is based on a fixed percentage of your revenues, which makes it friendlier and more approachable.
Also, as compared to a typical loan, revenue-based lenders are usually most interested in your company’s growth, since they draw their payments based on that. So you might not only get that much-needed money, but also receive business and additional funding advice, or even sales opportunities.
A business owner can get an approximate loan of up to 10% of the annual gross deposits, but there are some eligibility conditions that you need to consider. The need for imposing an upper limit to how much revenue you get annually to get such a loan is obvious, but there is also a minimum annual revenue that you must have. Plus, a typical condition would be that you have to have been in business for at least one year before applying. All in all, conditions are quite reasonable – but do you want to know what the best part about this great loan is? You can get it in the blink of an eye – most of these loans are usually granted within seven working days.
One great option when looking for a small business lender in the United States is OnDeck. OnDeck provides loans from $5,000 to up to $500,000 in as little as one business day. The origination fee is off 2.5%, and the interest rate is set at 5.99%. A big advantage of OnDeck is that you can qualify for one of its loans with a credit score as low as 500.
Another amazing small business lender when looking for alternative funding is Kabbage. The great thing about Kabbage is that they look beyond your credit score. One important dimension for them is how healthy your business is, and not only how creditworthy you look to them. They also have lower minimum annual revenue that they require – $50,000, which means you can easily apply for it even if you haven’t been earning that much.
What they do require instead is having your business for at least one year before applying. You can apply for up to $100,000 through a very flexible business line of credit. The amount of money you apply for has to be paid back, interests included, within their timeframe of 6 or 12 months.
Kabbage’s payment system works as follows: for the first two months, the fees are between 1 and 13.5% of the loan amount, and for each of the remaining four months, a 1% fee applies. For the six month timeframe, your monthly payment will consist of one-sixth of the total amount, plus the equivalent monthly fee.
Funding your business should not be a hardship. The only thing that is important is that you keep yourself informed of all the opportunities, and find those that are best suited to your needs and your abilities.