Nobody’s perfect, especially when it comes to money. Maybe you made a few late payments when you started out on your journey as a business owner. It happens. Dips in the economy, slow sales cycles, and late-paying clients can hurt your cash flow, and that impacts your ability to pay your bills. Even if you’ve gotten back on track, it’s possible that your business credit score has taken a beating and limited your future borrowing options.
Don’t lose hope quite yet. There are loans for people with bad credit. From time to time, all business owners need help with funding. While traditional banks are less likely to loan to business owners with poor credit, that’s only one financing option. Direct and alternative lenders consider factors outside of a bad credit score, so you have a viable shot at securing the funding you need fast. Here are three important criteria they’ll examine to make decisions about business loans for bad credit.
How Long Have You Been in Business?
Lenders want to see that you’ve been in operation for a full year. As business owners, it’s not something we ever want to think about, but the reality is that twenty percent of businesses fail within the first year, according to the Bureau of Labor Statistics. Being around past the 12-month mark shows you have staying power. Been around longer than a year? Congratulations! When it comes to securing financing, the longer you’ve been in business, the better you look.
What Are Your Annual Sales?
If you have at least $100,000 in gross yearly sales, you’re on the right track for being approved. Sales are a great indicator of the strength of your business, especially when they’re consistent. Sales also demonstrate that you’re following your business plan, and, perhaps most importantly where loans are concerned, sales demonstrate that you’ve got money coming into your business. It’s a hard truth, but a business that has mostly expenditures isn’t really a business at all and could be considered a hobby. In that case, unfortunately, you’re unlikely to be eligible for bad credit loans.
Do You Have a Banking History?
Lenders want to see three months’ worth of bank statements. These documents will provide them with insight into how well you handle your money. It also demonstrates your cash flow, which is important if the situation that caused you to have bad credit is far away in your rearview mirror. Bank statements will give lenders a chance to see that you’re paying your bills, which is a good indication that you’ll pay your loans. They’ll also calculate your average bank balance to determine if you have enough money to make your loan payments.
If your answers to these questions aren’t what lenders hope to see, you may not be ready to apply for loans for people with bad credit. That’s good information, too. Work on growing your sales, which can help you stay in business longer. And open a bank account today to start establishing your banking history. Bootstrap your business until you’re ready to apply for funding, and, once you are, be sure to partner with a lender who will offer you the financing options you need to take your business to the next level.