Most entrepreneurs think that because they have bad credit or no collateral that there is no chance of them getting a loan. But in reality, there are actually many different financing options that business owners have in which they can qualify, even with severe credit challenges, or even if they don’t have collateral.
As you already know, banks REQUIRE good credit AND collateral to get approved for business financing. But still, most people only go to their bank when they need money, because it’s the only place they know to go to. But the most common business bank loan, SBA loans, only account for 1.1% of all business loans (Department of Revenue 2013). The reality is that the big banks are NOT the suppliers of most business loans. And even though they require good credit and collateral to qualify, many sources don’t.
The big banks are very conservative, as most know. Due to this they commonly won’t lend to businesses in which the business owner has challenged credit or businesses that don’t have collateral. But businesses can succeed even if the owner doesn’t have perfect credit or doesn’t have assets that can be pledged as collateral. And many business loans make really good sense and have risk low enough based on other factors, even if the owner doesn’t have good credit and lacks collateral. So what types of funding can and can’t you get with credit issues or if you lack collateral?
Before you know where to go to get money if you have credit problems, you first should know where NOT to go. These sources might be appealing based on their offers and promotions, but they will not typically lend money to you if you have challenged personal credit. SBA loans, conventional bank financing, private investor money and unsecured financing, all have stringent credit requirements.
Where NOT to Get Financing with Bad Credit or No Collateral…
SBA and other bank conventional loans are tough to qualify for because the lender and SBA will evaluate ALL aspects of the business and the business owner for approval. To get approved all aspects of the business and business owner’s personal finances must be near PERFECT. There is no question that SBA loans are tough to qualify for. This is why according to the Small Business Lending Index, over 89% of business applications are denied by the big banks.
Many people think that when they have bad credit or lack collateral, a private investor is the best answer. But in reality investors typically want average or better credit of 650 scores or higher in most cases, and they almost always want you to pledge some type of collateral. They will also want solid financials for at least two years. This means they’ll want to see tax returns showing large net profits that are increasing over time. Think of private money as being for SBA and conventional bank loans that just miss the mark.
“Unsecured” means no collateral is required for approval. No collateral GREATLY increases a lender’s risk. No collateral requirements usually means it’s the quality of credit that determines qualification. Any type of financing that has no collateral requirements AND no cash flow requirements, WILL require good credit to qualify.
Where To Go to Get Financing with Challenged Credit or No Collateral?
Revenue based financing, asset based financing equity financing crowdfunding, business credit, and unsecured financing using a credit partner/personal guarantor, are all great funding options for any entrepreneur with personal credit issues or those who lack collateral.
The truth is, there is a LOT of capital out there that business owners can obtain, even with personal credit issues or no collateral. And most of it isn’t available through big banks. And the great news is that you can qualify for this massive amount of available financing based on your business strengths, as long as your business has even one strength. The big banks require your ENTIRE business and you to be near perfect to get money. But as you’re about to discover, there are a lot of other sources who will lend you money, even lots of money, based just on one strength. So as long as you have a strength to offset your weakness of having bad credit or lacking collateral, you can be approved. This is often called compensating factors.
Cash-flow Based Financing
Many businesses have already proven “concept” and have consistently increasing sales. Their strength is that they have shown stability and that they can effectively run a growing business. The risk to the lender is less as they are established businesses that are growing. How are your sales? Sales are the difference between an untested concept or idea, and a real operating business. Will your idea be well received? Do YOU know how to operate a business? Sales answer these questions.
If you have consistent sales, the next question is does the business have existing cash flow proven by bank statements? There are lending options available that only require a quick bank statement review for approval. They won’t even need to look at your tax returns, so even if your business shows a loss you’ll still be okay. The next question is does the business have over $60,000 annually received in credit card sales? Does the business have over $120,000 annually going through their bank account? If the answer is yes then revenue financing or merchant advances might be the perfect funding product.
For this type of “cash flow” based financing you must be in business six months. No startup businesses can qualify. You should have at least 10 monthly deposits or more going through your bank account, not just a few larger deposits. Most advertising you see for “bad credit business financing” are these products. These are short term “advances” of 6-18 months. Mostly short term at first, such as 3-6 month terms. Then when half is paid down lender will lend more money at a longer term, such as 12-18 months. Loan amounts typically go up to $500,000. Your actual loan amount is based on your revenue, usually you can get lent 8-12% of annual revenue, based on your verifiable revenue per your bank statements. For example, a company that has $300,000 in sales might get a $30,000 advance initially.
With revenue and merchant financing 500 credit scores accepted and are COMMON with this type of lending. Bad credit is okay as long as you aren’t actively in trouble such as in a bankruptcy or have serious recent and unresolved tax liens or judgments.
For this type of cash flow based financing rates of 10-45% are common depending on risk. Risk factors include: Industry, Time in business, Bank statement details – number of deposits, average daily balance, NSF charges, amount of deposits monthly, and credit quality. Usually rates are higher on first advance until you “prove” yourself to the lender. No tax returns are required, no other income docs are required, and no collateral is required.
And, you won’t need to pledge any collateral to get approved. Although you will typically be required to supply a personal guarantee, which is required for almost all business financing that isn’t accompanied by collateral.
Asset Based Financing
Asset based financing, also called collateral based lending, lends you money based on the strength of your collateral. Since your collateral offsets the lender’s risk, you can be approved with bad credit and still get REALLY good terms.Common BUSINESS collateral might include account receivables, inventory, and equipment.
With account receivable financing you can secure up to 80% of receivables within 24 hours of approval. You must be in business for at least one year and receivables must be from another business. Rates are commonly 1.25-5%.
You can also use your inventory as collateral for financing and secure inventory financing. The minimum inventory loan amount is $150,000 and the general loan to value (cost) is 50%; thus, inventory value would have to be $300,000 to qualify. Rates are normally 2% monthly on the outstanding loan balance. Example is a factory or retail store.
With equipment financing lenders will undervalue equipment by possibly up to 50% and work with major equipment only. Lender won’t combine a bunch of small equipment, and first and last month’s payments are required to close. Loan amounts are available typically up to $2 million dollars.
Common PERSONAL collateral that can qualify for collateral based lending might include a 401k and stocks. 401k or IRAs can be used to obtain up to 100% financing and rates are usually less than 3%. A retirement plan is created allowing for investment into the corporation. Funds are rolled over into the new plan. The new plan purchases stock in corporation and holds it. The corporation is debt free and cash rich.
With securities based lines of credit you can obtain an advance for up to 70-90% of the value of your stocks and bonds. These work much the same as 401k financing with similar terms and qualifications
Equity Financing and Crowdfunding
With equity financing you exchange a percentage of ownership in your business for financing, much like on the TV show Shark Tank. Personal credit is NOT an issue nor will you need to provide collateral, but equity investors are looking for a tested and proven concept and sales really help approval. You might find some investors to invest in a concept only, or invention. But most will want to see that you have an operating business that’s earning money and making profits.
And expect that they’re going to want a large piece of the equity. For it to be worth their time to invest, they might want 10-60% ownership of your business. That means they’ll be taking a large part of your future earnings, something you want to consider before recruiting an investor.
There are lots of websites in which you can obtain crowdfunding for your business. This type of funding gathers money from a “crowd”, or a lot of people instead of one big investor. If the crowd likes your idea, they may donate money to your project. Much of crowdfunding doesn’t need to be paid back and many investors are people you know. But if you really look into crowdfunding, you’ll find there are all types available.
Some types of crowdfunding sources do want a certain percentage of return; some want a percent of equity ownership. And there are different sources and platforms for different needs, and even unique niches or industries. So make sure you find the right crowdfunding platform for you before you post a project.
Business Credit and Unsecured Credit
Business credit is a great way to get money as approvals are not based on personal credit and no collateral is required for approval. Business credit reports usually get started with a few vendor accounts who will initially offer credit. Initial accounts create tradelines and a credit profile and score are established. The company’s new profile and score are used to get credit. Newly obtained credit is based on the company’s credit per the EIN, not the owner’s credit based on the SSN. Personal credit doesn’t matter as the credit linked to the EIN is used for approval.
When you use vendors to build your initial credit, you can then leave your SSN off of the application and can apply for business credit based solely on your EIN at most retail stores. Plus, you can get cash credit also, like high-limit cards with MasterCard and Visa. But building business credit all starts with vendor accounts. Without them, you won’t be able to start your credit profile initially, and that profile being established is the key to getting cash and store credit cards for your business.
Once you find the vendors you want to apply for, apply, and use your credit, it takes about 1-3 months for those accounts to report to the business bureaus. Once those accounts are reported a business credit profile and score are then established, and that can be used for you to get store credit cards next. Once you have about 10 payment experiences reporting, you can then start to get cash credit like Visa and MasterCard accounts. A payment experience is the reporting of an account to one business bureau. So if an account reports to two bureaus, it would actually count as two payment experiences.
Right now you can qualify for business credit without a personal credit check & without supplying a personal guarantee!
Minimum $250,000.00 in Corporate Credit Guaranteed!
BUSINESS CREDIT BENEFITS
Get Approved for HIGH-Limit Revolving Credit Cards in Your Business Name with No Personal Credit Check and No Personal Guarantee.
Get Your Business Credit Profile Quickly Setup and Activated with D&B, Experian, and Equifax Commercial Saving You Time and Money.
Access the Largest Supply of corporate Business Credit Sources to Get Vendor, Store, Fleet, and Cash Credit Linked to Your EIN and Not Your SSN.
Corporate Compliance Review to Ensure That Your Business Exceeds Credit Issuer and Lender Credibility Standards to Get Automated Approvals
Get Concierge Coaching and Servicing with Your Own Business Credit Advisors Who Help You Easily Navigate the Corporate Credit Building Process.
Monitor Your Business Credit with D&B and Experian Commercial in Real Time through the Credit Monitoring Integration Powered by Nav
Enjoy Our Business Credit Builder Program Risk Free with Affordable Payments and Our Iron-Clad, No Questions Asked, 120 Day Money Back Guarantee.
Repair Your Damaged Business Credit!
Fixing damaged business credit should be a top priority for you, the business owner.
Many business owners think they have items reporting on their business credit reports that really aren’t reporting at all. But over 90% of trade vendors don’t report to the business credit reporting agencies. So chances are good that the negative information you think is on your report might not even be there. But you should still know how to repair your damaged business credit.
Obtain Business Credit Reports & Know what’s on your business credit you should obtain business credit reports from the main business credit reporting agencies.
Business Credit reports are offered by:
You will 1st want to get a copy of your business credit reports to see what is being reported. So saving damaged business credit starts here!
The Fair Credit Reporting Act: Does it Have Anything to do with Damaged Business Credit?You might have already heard of the FCRA. The Fair Credit Reporting Act outlines consumer’s rights to dispute inaccurate information on their credit reports. But it’s essential to know that this law does NOT apply to business credit repair.
There are currently no laws which outline business owner’s rights regarding credit disputing. The FCRA also requires credit issuers to notify you of what bureaus they pulled your credit data from to determine your denial for financing.
In the business credit world this is not the case, you rarely ever know the source pulled your business credit or which reporting agencies they pulled it with.
Adding Credittude Credit Repairs’s Seasoned Tradelines to your credit profile increases your Scores up to 200 points and improves the quality of your Credit History permanently.
AUTOMATICALLY QUALIFY FOR:
WHY CHOOSE CREDITTUDE?
A lot of our clients have problems with inaccurate collection accounts hurting their credit. Either method will prevent your credit from being unfairly hurt. Always pay your debt, just be smart about it! Here are some tips that could help your credit.⠀
1) Do NOT pay off old collections. A better strategy is to first verify the debt is valid and confirm the debt is within the Statute of Limitations of your state. Next, instead of just paying it, you should factually dispute any inaccuracies of debt to have it removed from credit, then you can negotiate a settlement. ⠀
2) Try to get a "pay for delete" agreement where they agree to remove the item from your report in exchange for payment.
Here’s how purchasing a Shelf Corporation can benefit your business in a major way..
Who doesn’t want to be his/her own boss? Having your own business is pretty much fascinating. Researches have portrayed a large chunk of people, especially young adults, who are unwilling to work under bossy pressures and needless constraints that many organizations have to pose on them. So to get released from all of these stresses, they decide to start their own business. And when starting a brand new business, some self made entrepreneurs choose an option of starting all over from scratch on their own. But on the other hand, others seize some workable opportunities to hit on an attractive venture. To buy a Shelf Corporation is the most suitable option for the latter. Not only starting a new business, an aged shelf corp advantages you when it comes to expanding your existing business. In this article, will aim to discuss how buying an aged corporation can facilitate your business expansion and advantage its positive financial growth.
1) Acquiring Credit Ready Shelf Corporation
Most lenders and financial institutions don’t trust new companies and are therefore not willing to give a loan on most cases. The company that ages for a certain length of time is ready for financing. Most cases this is at least three years in business or more. Such a corporation is more likely to qualify for the loan as compared to a newly established corporation. The older the business is, the more confidence the financial institutions place in them and lend them the required funding. This corporate funding can help you expand your business just as you acquire a credit ready aged corp. So it’s pretty feasible to purchase an aged corporation rather than establishing a new one from the scratch.
2) Time And Cost Savings
You might not know anybody who doesn’t love their time and money. Everybody here is always short of time and money. Aged Shelf Corporations are best suited for such people, who are time and cost-conscious but need their own business too. Acquiring a shelf company saves you a massive cost that might increase if you buckle down to creating your company. Besides this; creating a new shelf corporation requires a huge lot of time and immense paperwork. (All of this fuss can be cut down if you decide to buy an aged corporation from Credittude Credit Repair.
3) Bidding On Government Contracts
Most states in the USA require the corporations to stay in business for a definite period like 2 or 3 years. The obligation is to make them able to qualify for the government contracts. So acquiring a Shelf corporation that’s two to three years old allows you to bid on the government contracts. When a company bids for the government, it qualifies as ‘approved’ because if it can satisfy the government, it can satisfy anyone.
As a business owner; you can easily secure the equipment you need for your company. One of the best & smartest ways to obtain the equipment you need is by using Equipment Financing Linked to your EIN, and not your SSN.
You can easily deduct the interest you pay on the lease & you won’t need a large down payment to be approved. This is one of the reasons over 85% of U.S. businesses use equipment lease financing to acquire equipment for their businesses. When you use Equipment Financing you can improve your company’s cash flow and increase capital period.
You can always keep your normal cash flow, leave your funds in the bank, avoid major out-of-pocket expenses incurred by purchasing the equipment up-front & benefit from multiple major tax advantages.
Equipment Leasing is one of the most common types of equipment financing available today in the industry.
When you lease equipment you will find most leasing options offer you fixed-rate financing. This means your interest rate and payments will stay the same from month-to-month during the term of your lease.
Whether you may need office equipment or large commercial equipment used for manufacturing; Equipment Financing is a perfect option for you and your business.
Equipment financing can additionally be used if you are starting a new business which needs equipment to operate.
There is typically no down payment required on equipment leasing loans. The lender will collect one to two of your monthly payments upon approval.
This amount of money required is usually equal to 4-8% of the total equipment cost.
You will have low monthly payments available. And your payments can be tailored to fit your company’s individual needs.
You can also include your taxes and other charges such as installation charges into your new equipment lease.
Equipment loans are always perfect for any type of business owner looking to purchase equipment.
How Rich Do You Really Want To Be?
Have you ever thought about what you would really purchase if you were rich for real, for real?
Not only the cars and houses, but also the entourage you might have, the food you eat, the entire impact to your social life.
No joking around, it would be totally awesome to be super rich!
Be honest, what you are doing now potentially making you rich? Can it help you to become wealthy?
Do you truly LIKE & LOVE what you do?
Do you offer what is HIGHLY sought after by others?
If your final answer is “yes” to all of these questions you are well on your way to massive success and wealth!!
But if you answered no; you may possibly need to readjust your course to lead you to a happy life full of the results you’ve been working for and deserve to have.
That course readjustment might simply be to add a new product that you can answer “yes” to these questions with, something people really want and will gladly pay for. A lot of something you may be able to help others with and love offering, and also something that can make you a lot of money that you can use for your own writer’s room or other things which will automatically lead you to a fulfillment and long joyed life.
Would you believe us if we told you that credit card interest rates in other countries are over 150%?
Rates that are this high is common in countries where the regular credit systems is not well developed. For example; in Brazil where the credit interest rates have averaged over 300%, certain aspects of credit reporting that are taken for granted in the U.S. credit system have not historically been allowed at all. The rules are changing, though, which is commonly expected to bring the high interest rates all the way down.
The point is, with no credit reporting to speak of; the only thing banks and lenders can do to protect themselves in the long run would be to charge outlandish rates. As credit reporting systems are developed and credit reporting practices take hold, the interest rates eventually come down because banks and lenders have a better handle on the RISK associated with a given borrower.
In the United States Of America the credit system is far from perfect. Privacy & consumer protection concerns often lead people to believe that the system as a whole is a big problem. But in reality; without the data collection, tracking, and reporting practices of a functioning credit system, loans and credit would quickly become unbearably expensive.
The reason we can get credit cards with reasonable terms–the reason we can get lines of credit, personal loans, business loans, and more–without breaking the bank, boils down to the fact that we have a fairly efficient and well-functioning credit reporting system at the end of the day. Control your credit - secure your future!