Loans for small businesses with a low credit score

Many small business owners struggle to get business financing, and there is absolutely nothing unusual about this. Getting a business loan for small businesses, such as retailers, restaurants, garages, etc., is not as simple as you might think from the bank.

However, this does not mean that it is not possible to obtain a business loan. It all depends on where you go to look for the loan. There are usually two main options business owners have: approach their local banks and go to a private lender or financier.

Banks and small business loans

Banks look at small business loan applications from your perspective, and your perspective is determined by their criteria. When we talk about criteria, there are numerous criteria and all of them are rigid and strict.

Banks generally require high credit scores, which should be around 700 or higher. If a business applying for a loan with the bank lacks excellent credit, their application will be rejected based simply on that criteria. Bottom line to banks and credit scores, financing a bad credit business with a bank is not a possibility.

This is not to say that there are not a number of other criteria, which banks follow carefully and take just as seriously. Bank criteria have been established for decades based on shared experience, and these criteria are general.

As is generally recognized, banks are not very interested in financing small business loans. The reasons for this are many and one of the main reasons is that small businesses are considered high risk investments from the perspective and experience of banks.

Private Funders and Small Business Loans

With a private lender, the situation is completely different from what a business owner will experience with a bank. Private lenders have a completely different list of criteria for providing cash advances to business owners.

As MCAs (Merchant Cash Advances) are mainly offered by private lenders, the criteria for these is simple. An MCA loan is an unsecured loan and also does not require high credit scores. As a result, it is easy to qualify for this type of financing.

However, many small business owners don’t view MCAs in a friendly light, and for reasons. Interest rates are higher than traditional bank loans, and most business owners want low interest rates.

However, the objective of MCAs is not to compete with bank financing, since the two are in quite different scenarios. Aside from the fact that they are both business financing, the entire process, requirements, features, and all other details related to financing are completely different.

With an MCA loan, the question of how to qualify for small business loans doesn’t really apply. Only in very few cases do private lenders turn down small businesses. In general, most companies receive the funds they need for their business.

MCA Loans V/S Bank Loans

Merchant cash advances or MCAs, in short, are usually accompanied by high interest rates. Much higher than what the bank offers, and the reason for this is that these are unsecured short-term loans.

There are many businesses that would never qualify for a traditional bank loan, no matter how badly they need or want it. If your credit scores are low, or if you can’t provide the collateral banks require, your applications will be denied. This is not to say that there aren’t many other reasons why banks don’t turn down small business loan applications. Furthermore, banks are not required to provide financing to those who choose not to. This leaves many small businesses with no other option.

For an MCA loan, a business does not require much in the way of credit scores and collateral. The basic criteria for an MCA loan are listed here, as follows. The business must be at least 12 months old and in operation. The business owner must not be in active bankruptcy at the time of the loan application. Finally, the gross income of the business must be at least $10 thousand per month.

Simple criteria make it easy to get an MCA, and the drawbacks are definitely interest rates and duration for some business owners. However, those who take advantage of such business financing are those companies that have no other option or those that require fast business loans. Some of the advantages are processing times, which can be as little as a couple of days.