A bad credit small business loan or high-risk small business loan is a loan extended to a small business owner with little or poor credit, or to what is considered a high risk industry. If you have a bad credit history, or even no credit history, it’s not impossible for you to get a small business loan to grow your business, just don't expect it from your bank. Don't worry, we've got you covered!
First and foremost, when seeking a high-risk small business loan, you have to be realistic and expect to pay a high interest rate. Lenders will want to minimize their risks by charging greater interest, or perhaps ensuring a short-term agreement. Another place to look for a high-risk small business loan with bad credit is a web-based lender, which is often a micro-lender. You can borrow a relatively small amount of money with bad credit from one of these lenders ($5,000-$25,000) and start to improve your credit score by paying the microloan back on time. “Non-bank” providers such as LVRG and their lending partners are the ones most willing to lend to businesses with low credit scores, under 2 years in business or to small business owners who lack collateral.
Well, the good news is... You have some options!
#1. High Risk Merchant Cash Advance (MCA's) - MCA's are offered to high risk merchants who are in higher risk or restricted industries by most other lenders, or have credit issues, bankruptcies, judgments, etc. There are only a few small business loan resources that are willing to fund high risk merchants, and LVRG leads the way. High Risk MCA's are available to businesses that have been classified as high risk, and are therefore unable to obtain bank loans or any other form of financing from traditional lending institutions.
Other terms often associated with a High Risk Merchant Cash Advance are: Same Day High Risk Small Business Financing, High Risk Merchant Cash Advance Loans, High Risk Business Cash Advance, Unsecured High Risk Business Loans, High Risk Merchant Money Advancement, High Risk Merchant Cash Financing, No Interest High Risk Merchant Loans, Unsecured High Risk Business Loans, High Risk Business Cash Advances, High Risk Merchant Cash Advance Loans, and High Risk Merchant Cash Advances.
A merchant cash advance can provide high risk small business borrowers with an upfront fixed amount of cash, up to $1,000,000 in as little as 24 hours, regardless of credit. The funding amount is based upon a percentage of the businesses credit card receivables or daily cash balances using historical credit card receipts and bank statements to determine the initial advance. The business pays back the advance, plus a percentage, often referred to as a discount factor or hold-back, from a portion of their credit card receivables or cash receipts. The remittances are drawn from the business customer on a daily, or weekly basis, until the obligation has been met.
#2. Small Business Revenue Based Loan - A small business revenue based loan could be your businesses lifeblood and provide it with several financial benefits. When your business is growing, chances are you'll need an injection of cash to continue its growth. Bank loans are often times too restrictive and near impossible to obtain these days anyway. In this situation, a revenue based loan may be the best solution, especially if you are in a high risk industry, have minimal time in business, lack collateral or have credit challenges. If you use it wisely, a revenue based loan could do wonders for your business. Without being capitalized, chances are you will wind up in a growth stalemate and a revenue based small business loan may be a perfect option for you.
If your business is under 2 years old and starting to scale, you obviously want to ride the wave. You cannot do this without a dependable source of capital. Bank criteria is typically a minimum of 2 years in business, strong cash flow, positive ratios and perfect credit. However, revenue based loans are offered based off revenue and cash flow, not credit or collateral. This type of loan will give you a shortcut to cash since it only requires a few months of business bank statements; whereas banks require 2 to 3 year business and personal tax returns, income statement, balance sheet, personal financial statement, debt schedule and countless other documents to complete loan package. Many times, your bank statements are enough to demonstrate that you can repay your loan.
A revenue based loan could be highly advantageous for your business, and quite simple to obtain no matter what your credit score, collateral or time in business. It helps you grow your business quickly and it does not saddle you down with long-term, highly encumbering debt. It gives you the cash that you need quickly, to grow your business your way. What more could a growing business need?
#3. Small Business Cash Flow Loan - Even if your small business is growing, you may find yourself needing extra cash to cover day-to-day expenses such as payroll, rent and inventory, or to pay for short-term projects that could grow your revenue in the long run. Uneven cash flow is one of the biggest challenges of small businesses throughout all industries. For this type of business financing, lenders provide you funds and use your future expected cash flow as collateral for the loan. You’re essentially borrowing from cash that you expect to receive in the future by giving the lender the rights to a predetermined amount of these receivables. These are primarily used for working capital or take advantage of short-term ROI opportunities. Your credit scores will usually be checked, but they play less of a role. As the name indicates, the lender is more concerned with inspecting your cash flow (usually bank statements) to approve your application. Turnaround time is another great feature of a cash flow loan, as funding usually takes place in as little as 1 day in some cases.
One of the greatest benefits of a bad credit small business loans or high risk small business loans offered by LVRG, is that the funds can be used for a host of business expenses. There are typically no restrictions on how you choose to use your capital, however some of the more typical uses include:
- Buying Equipment – Could a new computer, desk, telephone, cash register, POS system or software come in handy? Money to pay for the purchase of necessary business equipment could help boost your profits.
- Paying Employees – Instead of running your business like a one-man show, a few extra hands could really help. Spending borrowed money on employee’s salaries can be the answer rather than disrupting your cash flow to cover this expense.
- Purchasing Inventory – One of the most common uses for high risk small business funding is buying inventory. It takes products in stock to make business profitable, so it only makes sense to invest in enough inventory to make sure you always have enough to sell to customers.
- Expanding the Business – If your business is experiencing some success, you might want to start thinking about taking things to the next level. A lump sum of immediate cash might be just what you need to get business booming.
Other uses of this capital may include:
- Marketing Campaigns
- Franchise Fees
- Debt Refinance
- Leasehold Improvements
- Expansion and Remodeling
- Furniture and Fixtures
- Machinery and Equipment
- Real Estate Purchase
- Licensing Fees
- Working Capital
It's important to note that high risk merchant cash advances, cash flow loans and revenue based loans are non-collateral borrowings, meaning there is no asset protection for the lender. Because there is no surety that the borrower will repay the money or collateral protection, it's only fair to assume you'll pay higher interest rates, or factor rates on the money. You can't expect bank rates; with bad credit and/or challenged credit history, minimal underwriting, no collateral or being in a high risk industry, etc.
There are a few other reasons your business may be classified as high risk, such as:
- Poor Credit
- Home Based Businesses
- Tax Liens
- Out of the Box Business
- Vapor or Hemp
- New Owner of Establish Business
- Businesses with Large Financial Liabilities
- Many Position Files – Meaning you have multiple MCA’s currently outstanding
In addition to the much easier method of obtaining working capital from a high risk small business funding source such as LVRG, the small business financing options mentioned above have a many incentives when it comes to small business financing:
- Much quicker approval times. This translates to faster cash-in-hand, allowing you to take advantage of current market prices. Whereas business loans require you to have collateral in order to gain favorable consideration, a cash flow or revenue based small business loan product simply requires you to be subject to a limited amount of conditions.
- A merchant cash advance or high risk small business loan is also much more beneficial to the cash flow of a company since it does not require any monthly payments or upfront fees that are characteristic of loans.
- There is no limitation on how the funds acquired from bad credit small business loan or high risk merchant cash advance can be used. Funds that are loaned through a financial institution must be used for the stated purpose by the business. As a result, money from a business loan has a very narrow scope of action as compared to money that comes from a revenue based small business loan product.
- No UCC-1 is required
- No worries about points of upfront fees
LVRG is able to provide high risk business funding and bad credit small business loans to industries most lenders won’t even consider. Some of the industries that we are able to provide fast working capital financing to, are as follows:
Home Businesses • Sole Proprietorship's • California Businesses • Construction • Bail Bonds • Antiques (No Special Orders)• Rental Or Sales Agencies • Collectibles/Memorabilia • Computer Hardware Sales, Service & Repair • Educational Materials / Seminars/ Self Help • Escort Service & Adult Entertainment • Internet Business Lead Lists (All Types) • MLM – Multi Level Marketing (Product Sales Only) • Modeling Agencies & Talent Agencies • Moving Companies • Online Malls • Online / Mail Order • Event Ticket Sales • Private Investigators • Public Relations Services • Real Estate Related Industries • Security Equipment & Surveillance Equipment / Service Providers • Travel Agencies • Web Advertising • Vapor & Hemp
So there you have it, 3 quick, efficient and “obtainable” ways to access capital for your small business, even with bad credit, minimal time in business or being in a high risk industry. Cash flow loans, revenue based loans and merchant cash advances from LVRG have helped thousands of businesses just like yours not only turn the corner, but pull ahead in the race. Call us today, our expert funding advisors are ready to learn about your small business financing needs, while doing so with speed and transparency. We're here to help!