Large businesses are often able to obtain financing based on their assets and potential for growth. However, when owners of small businesses apply for funding, lenders assess their personal financial situations, assuming that the diligence with which they conduct their personal affairs will indicate how they handle the responsibility of loans. Even if past bad habits have negatively impacted your personal credit, though, you can still get some form of business funding. Here are some tips to help you accomplish this.
Consider Your Needs
Sometimes cash flow problems can be mitigated without taking out loans. For instance, you may be able to cut expenses and find ways to increase your income. If these measures are inadequate and your company really requires business funding, be realistic in your appraisal of how much you need and how much you can expect. You may not be able to get ideal terms, but you should be able to obtain some form of financing.
Maintain Honesty When Applying
Lenders conduct their own due diligence when they are considering your application for business funding. It does no good to falsify or leave out your credit information, because they will find out anyway. Giving them false or incomplete answers will only cause them to lose confidence in the other information you have provided. Instead, be thoroughly honest in your application. In person or in writing, make it clear that you have no intention of repeating past mistakes. This shows the type of entrepreneurial character that lenders appreciate.
Review Your Options
One business funding option that you may qualify for is a microloan from the U.S. Small Business Administration. Microloans of up to $50,000 are offered specifically to small business owners, including those with poor or no credit. Another option is to factor your unpaid accounts receivables. This involves receiving an advance on your invoice payments so that you don’t have to wait 30 to 60 days for the funds you need. Since the invoices serve as collateral, lenders are concerned with the creditworthiness of your clients, not your own. If your business involves reselling products to government or commercial clients, a third option is purchase order financing.
For more advice on obtaining business funding with bad credit, contact our offices today.