4 Simple Steps to Repair Bad Business Credit

bad credit report

Business credit is a rose with thorns. The beauty of it is that you can rely on credit to get the business capital you need at the time that you need it. This can help your company respond quickly to changing market conditions, and get in early on new business opportunities.

The downside, however, is that if you miss payments to creditors, it leaves a mark on your credit score. The result may be the inability to borrow money in the future, lease real estate or equipment, or make sizable purchases on credit. All of these can act as direct hindrances to the growth, and possibly even the survival, of your business – even after you’ve dug your way out of debt.

Fortunately, there are a few strategic steps a small business owner can take to repair their business credit score. Let’s take a look at a few of the most important ones:

1. Communicate with your creditors

According to the Houston Chronicle contributor David Ingram, the first step to paving a road to better business credit is simply to get in touch with your creditors. At the end of the day, they want your money just as badly as you want to give it to them, so they’ll most likely work with you on creating a repayment plan that makes sense given the circumstances.

“Creditors may suspend your accounts and allow you to pay what you can each month until the debt is paid,” Ingram wrote. “Others may accept a settlement offer, closing your account for a lump sum payment that is lower than your total balance.”

The resolution doesn’t necessarily have to entail one of the two options above. The bottom line is that you and your creditors can typically reach an agreement, as long as you’re transparent with them about your current situation.

2. Build credit with the help of your suppliers

With a few exceptions, no business really survives in a vacuum. The vast majority of companies rely on third-party suppliers for raw materials, ingredients or wholesale goods. While some suppliers expect payment prior to delivery of these supplies, others will offer “trade credit,” according to Nerdwallet contributor Teddy Nykiel – and this very standard practice may actually be able to help you clamber out of bad credit.

Establishing trade lines essentially gives your small business the option to pay several days or weeks after receipt of the materials.

“If you have this type of accounts-payable relationship, ask your supplier to report your payments to a business credit bureau,” Nykiel wrote. “Your business credit score will get a boost as long as you stick to the terms of the trade agreement.”

Over time, this can help improve your overall credit score.

3. Make payments on time

It may sound like a no-brainer, but more often than not, late or missed payments are the reasons that a small business ends up with a bad credit score. Sometimes small business owners will pay late only because they want to have a certain amount of merchant capital available to them in a given moment – perhaps because they foresee a big expense up around the bend that could lead to significant return on investment, or maybe because they prefer to have that safety net available at all times.

At the end of the day, however, the best safety net for a small business is good credit, and you’re better off getting a cash advance on a loan than you are putting off on-time payments.

4. Take out a small-business loan

Late loan repayment may have been what got you into your credit pickle in the first place, so why in the world would anyone with bad credit try to take out a small business loan? Furthermore, is that even possible to do with bad credit?

In response to the first question, taking out a small business loan can actually be your company’s salvation. Often, bad credit is the sign of past indebtedness, or old mistakes that left a dent in your business FICO score. It could have even been the result of EIN theft, which despite reflecting poorly on your company, is in no way your company’s fault.

In response to the second question, regardless of the reason that you’ve ended up with a bad credit score, if you can feasibly repay a small business loan on time, there are plenty of alternative lenders willing to finance your business, despite a less-than-stellar credit score.

“Eliminating your existing debt is a positive first step, but your business will need to continue to borrow money to strengthen your credit rating over time,” Ingram wrote in the Houston Chronicle. “Remember that borrowing money is not necessarily a bad thing; a problem only arises when you’ve borrowed more than you can reasonably repay.”

If you’re confident in your company’s ability to pay off new debts, take out a small business loan. It’s one of the best ways to enhance your business credit score.

Long-term vs. Short-Term Business Loans

short term and long term loans

What’s the difference between long-term and short-term business loans?

A long-term business loan involves multi-year repayment terms following a detailed application process. A short-term business loan provides a company with quick access to capital, sometimes in as little as 24 hours.

Whether it’s working capital, a merchant cash advance or some other type of business loan, how much money you plan to borrow is probably the single most important factor for you as a business owner.

However, there are plenty of other loan components to consider, including term length.

Whether your loan features short or long terms can impact everything from how much interest you pay over time to how much money you can ultimately borrow.

Short-term business loans

For most business owners, a short-term loan will be the way to go. These types of loans can provide you the funds you need fast, sometimes in as few as 24 hours.

And with more alternative lending choices available now than ever before, it’s become that much easier for business owners to skip the restrictive loan requirements of traditional banks and obtain the money they need from elsewhere.

“Most times, small to medium size businesses don’t need long-term financing …,” said National Funding founder and CEO David Gilbert. “Alternative lending options, like working capital loans, merchant cash advances or small ticket equipment leasing, offer the flexibility and quick turnaround needed for owners to keep their businesses running smoothly.”

Essentially, short-term loans are an easier way for business owners to get liquidity and overcome financial setbacks, as opposed to taking on larger, more long-term debt.

Long-term business loans

On the other hand, long-term loans may be necessary for some businesses. This type of financing involves multiyear repayment terms that can sometimes last for decades.

Whereas short-term loans may have higher interest rates at first, business owners who take on long-term financing typically end up paying more in interest. This is because the long term length allows interest to build up over time.

It is also generally more difficult for a business owner to obtain long-term financing. This is because they will need to go through more traditional lending channels in most cases, and contend with the strict qualifying standards put in place by larger banks.

While an alternative lender such as National Funding has bad-credit loans in place to help business owners with less-than-perfect credit histories, many traditional financial institutions do not.

Which is best?

Ultimately, which type of funding option is best depends on your specific business needs. For most small business owners, a short-term loan will likely be more suitable. However, sometimes long-term financing may be necessary.

Either way, it’s important to work with a lender who understands the workings of small businesses and can tailor your loan to support your success.


How to Get a Business Loan with Bad Credit and No Collateral

Bad Credit Business Loan

Small business owners can develop a successful, vibrant organization and still deal with common problems like bad credit and a lack of collateral. Does that mean your business can’t secure a loan?

While having good credit and collateral on hand can help you secure a loan in some instances, there are established, dependable alternative lenders – like National Funding – that can work with a wide variety of financial situations.

The problems you may encounter

Credit is a long-term situation, and items as old as seven years can have a major impact on your rating. Many times, people and businesses have bad credit because of limited resources, not conscious decisions that lower their scores. Both your personal credit score – calculated on a scale of 300 to 850 – and your business credit score, usually measured from 0 to 100, play a role for small businesses.

Turning the corner financially – by starting a successful small business, for example – doesn’t erase a credit score. You have to contend with your rating until items are resolved or fall off your report. That means complications when seeking loans from traditional lenders, like banks and credit unions. These institutions place significant weight on small business owners’ credit scores when deciding whether to lend money to a given company.

Collateral is a much different subject than a credit score, although its presence or absence has a similar impact on the loan decisions made by banks and credit unions. Some businesses simply have collateral that is easily used to secure a loan, while others don’t. Similarly, some business owners have personal possessions they feel comfortable putting on the line, but others don’t have that luxury.

While the Great Recession is in the rear-view mirror, the impacts of that economic downturn on banks and similar lenders led to the development of more conservative lending practices that continue to this day. Many small businesses that could have secured a loan in the past from traditional lenders cannot any longer.

A lack of collateral and a low credit score can mean extreme difficulty in securing a loan through more traditional means. Instead, your business needs to consider working with a more flexible and responsive alternative lender.

Overcoming these obstacles

Business loans for poor credit aren’t impossible to find. In fact, working with an alternative lender like National Funding can mean avoiding a number of the frustrations and other issues that arise when dealing with a traditional lender. As opposed to the severe and frequently hidden limitations on lending put in place by banks and credit unions, National Funding offers a clearly visible baseline standard that businesses can use to determine if they can start the process.

Does your business have:

  • A full year of operations under its belt?
  • At least $100,000 in gross yearly sales?
  • Three months’ worth of bank statements?

By meeting these qualifications, your company is starting off on the right foot when applying for a loan through National Funding. You don’t need to worry about the state of your business or personal credit score, nor the availability of qualifying collateral.

Of course, traditional lenders don’t only look at credit scores and collateral when determining creditworthiness. They may also require many months or years of bank statements, tax forms, detailed business plans and other documents that may be difficult to assemble to their exacting standards.

Working with National Funding means avoiding these lengthy, time-consuming and sometimes-painful processes in favor of a more direct approach. You can apply for a business loan between $5,000 and $500,000 through our easy, no-obligation application process and a decision in as little as 24 hours.

When Equipment Leasing & Financing Makes Sense

when leasing makes sense

Equipment leasing and financing makes sense for most small businesses in America, although many business owners are unaware of the benefits.  Nearly any type of equipment, in nearly any industry can be leased and financed.  And, with Section 179 of the United States tax code, business owners can qualify for tax deductions on equipment they already need for their business.  Check out our infographic below to learn more about When Leasing Makes Cents.

when leasing makes sense

When Leasing Makes Cents

Some of the most successful small businesses in America never purchase their equipment… they lease it! Equipment leasing makes sense for a lot of businesses today because leasing provides many benefits that purchasing does not.

Who Leases Equipment?

According to the U.S. Small Business Administration:

  • 85% of all companies lease equipment.
  • 89% of those companies that lease equipment will lease again in the future.
  • 75% of all companies that lease equipment indicate that leasing is their best means for financing equipment purchases.

Businesses of ALL SIZES lease and finance equipment.

The Benefits of Leasing Equipment

  • Purchasing Power: Equipment lease financing allows the lessee to acquire more and/or higher-end equipment.
  • Improved Balance Sheet Management: Certain types of leases help the lessee better manage the balance sheet and improve the overall financial picture, by conserving operating capital and freeing up working capital for inventory, expansion, and emergencies.
  • 100% Financing: With equipment leasing, there is no down payment. The term of the lease can be matched with the useful life of the equipment.
  • Up-to-date Technology: Leasing provides companies with the ability to keep pace with technology. The lessee can upgrade or add equipment to meet ever-changing needs.
  • Many lessees choose to structure their leases to include installation, maintenance and other services, if needed.
  • Easier Financing Than Loans: With a lease companies can avoid requirements like compensating balances, large down payments, client list reviews and cash-flow projections, making the finance process faster and easier.


This infographic was brought to you by National Funding