The 5 Best Finance Paths for Businesses with Bad Credit

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Are you a small business owner or entrepreneur with poor credit and a need for new business financing? Most banks shut out such borrowers because of the high-risk baggage that comes with them. But there is no excuse to throw your hands in the air and forget about the potential of extra investment. According to Entrepreneur magazine, only 25 percent of total funding comes from major banks and lenders for any company.
If you need funding or just extra cash to last through the off-season, start exploring options beyond the large institutions. Here are five of the most effective ways you can apply for loans or cash advances even if your credit history is still recovering from a past fall.

1. Microlending: Microlending is for far more than emerging markets. Microlenders specialize in supporting entrepreneurs and small start-ups of all kinds. The idea is based around Web 2.0 technologies and community efforts. Many interested people agree to finance a small amount of a loan, perhaps only a few dollars at a time. A third party acts as a manager for this loan, gathering the payments until the loan amount is reached. This method is used by several sites to support everything from growth in ethnic communities to independent art projects.
Sometimes, the “larger” microlenders are willing to offer several thousand dollars in loans on an individual basis, making it easier to quickly take out a loan rather than raise money for a project. Some microlenders will lend as much as $25,000 to the most promising entrepreneurs. These microloan options are excellent for business projects that have a specific focus or feature – such as start-ups owned by women.
2. Merchant Cash Advances: A merchant cash advance is a unique type of loan made to firms that use credit card payment processing and can pay back the loan through these payments. If you let your customers pay by debit or credit card and can count on a relatively stable flow of income from month to month, investigate merchant cash advance organizations such as Merchant Resources.
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Essentially, merchant cash advance organizations purchase a percentage of your future sales. They may lend you $5,000 today, but collect 5 percent of every card payment you process until the money is paid back…plus an interest fee. This is an attractive option for businesses that see a lot of transactions, since they only pay back the advance when they get paid. Slower months lead to slower payments, and high-profit months pay the loan off more quickly. Of course, entrepreneurs who have not yet started a business or companies that rely on other methods of payment may have trouble qualifying for this type of advance.
3. Co-Signers: Co-signing has been a go-to option for borrowers with poor credit for years. Small businesses can use co-signing as well, if they can find someone willing to back them up on a loan. Typically co-signing leads to a partnership arrangement or similar type of contract. However, it can also provide you with the money you need in a tight spot, and should not be overlooked.
4. Angel Investors – At Home and Abroad: Angel investors are not just large capital firms looking to fund a promising idea. Sometimes your best angel investors are those in your family or in your close circle of friends. They may not be able to lend much, but talk with them when you have a good idea or a serious need for funding. Present your information honestly and clearly, using documentation and examples. Even if your friends and family cannot help you meet your budget, it is good practice when you find a chance to present to larger angel investment firms.
5. Bad Credit Business Loans: If all else fails, consider using a bad credit business loan. These loans typically have a catch, such as an advance arrangement based on annual gross revenue, or unpleasantly high interest rates. Read the small print on these loans and decide if one will work for you. The right bad credit loan in the right situation can be a godsend, but you must thoroughly trust a lender before committing. Watch out for unfavorable rate conditions or scams.
Author Bio:
Jenny Willis is a professional blogger that enjoys providing consumers with personal finance advice. She writes for, a leading check printing company of designer personal and business checks.

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