Types of Loans for Business Owners Having a Low Credit Score


Business owners who have a bad credit often face difficulties in getting loans. Traditional banks avoid giving out loans to such businesses in order to minimize their credit risk. However, certain specialized institutions provide bad credit loans to businesses.

Types of loans for business owners with bad credit

The numerous types of loans business owners with a low credit score can obtain include:

Merchant cash advance

This type of finance is actually not a loan, but an advance payment made to business owners based on future sales on credit card. In this type of advance, the lender usually extends a business line of credit at a fixed percentage of the future sales on the credit card of the business owner. The advance amount once credited can be withdrawn on the basis of the daily sales on the credit card.

Revenue based loans

In this type of financing, the lending institution gives a business line credit based on the monthly business revenue after reviewing the bank statements of the business. The amount extended as loan is usually a percentage of the average monthly deposits of the business.

This is a short term loan which has a maximum repayment time period of 18 months. The fixed amount payments are withdrawn from the business bank account daily on all business days.

Accounts receivable financing

This is by far the best business line of credit for business owners with a low credit score. In this type of financing, the lending institutions provide easy and quick loans solely on the basis of the amounts receivable by the business for the services rendered by it. Most lending institutions may provide loans to the extent of 70% to 90% of the total accounts receivable.

Lease back or equipment sale financing

Business owners with bad credit but who own equipments can get loans by leveraging a sales lease back. In this type of financing, the business owners are paid a lump sum amount against the sale of equipment. The purchasing company leases back the equipment to the business owner who can make monthly payments for the lease for a certain period of time. At the expiry of the term the business owner may purchase back the equipment or extend the lease.

Inventory based loans

Business owners with a bad credit can get loans on the basis by leveraging inventory. Most lending institutions generally extend loans to the tune of 70% of the total value of the inventory.

While applying for bad credit loans, it is advisable for business owners to be prepared regarding the following aspects:

  • Keeping all necessary documents and paperwork ready.
  • Quickly furnishing any information required by the underwriter.
  • Maintaining regular bank deposits.
  • Stating the objectives and goals regarding the funds.

The different types of loans make it possible for business owners with a low credit score to obtain the necessary funds for running their business.

National Business Capital can help business owners in New York with low credit scores to get loans for various business purposes. The company provides various types of specialized loans to cater to the needs of business owners.