Financing is a life blood of any business. You have to be able to tap into external funding sources to grow your business. Unfortunately many businesses, particularly those with bad credit are not able to obtain conventional financing due to strict restrictions. Recent developments have enabled many of these type of businesses to obtain the badly needed money. Keep in mind that the interest rates will be high when you try to finance your business through this alternate routes. Shop around for the best rates possible. Here are 6 unconventional options you have available for business with bad credit.
1. Private Lenders
Getting financing from someone you know can be daunting. You will have to make a list of people you think that will be able to afford to lend you money. It is not an impossible process. The answer is closer than you think. You can use a former employer. They have the money and the means to lend you cash.
Some of them give personal loans. They know who you are, so they are familiar with your character. They will find out if you are worth the risk based on your work history and attitude. They will have their attorney draw up an agreement for you to sign.
2. Use Factoring
Another option is to use Factoring companies. You can sell you invoices or accounts receivable to them. You will get paid faster. In some instances, you will get immediate a cash advance on your outstanding invoices. Once you sell them your accounts receivable, they will bill your customers to get the money that they have paid to you.
In turn, they will charge you a fee for selling you the service. If you want to get access to more money, you can sell them all of your accounts receivable. The more invoices you sell them, the more money you will get to use for your cash flow needs.
3. Microlenders and Web-based Lenders
There is a limit on the amount of cash that you can get from microlenders. You can get cash ranging from $5,000 to $25,000. They will also report your payment history to the major credit bureaus so that you can improve your credit rating. Shop around for the best rates possible.
The application process gets done quickly. You can finish within an hour. It will take a few days for the application to get accepted. Once that has gotten completed, you will get your cash. You will not pay a high fee for the underwriting of the loan, but the interest rate is typically high.
4. Gifts and Grants
If you do not want to have to pay anyone back, you can get free money via donations and contributions. You will have to search the internet to gain access to subsidies. Stay clear of services that offer to get you government grants. Do the research to find out what programs you can find that suits your business purpose.
If you are in a low-income area, businesses in healthcare, technology, and retail, generally qualify for grants. You can also get gifts from relatives, free office space from a former employer, and free services from friends and former coworkers. Look into your phone book to see whom you think would offer you a subsidized loan.
5. Social Lending Sites
You can use crowdfunding to raise money. You can research to see what sites you can use for the funding source. You will get the money from contributors via your social media site you use to promote it. In return, you can promise your donors free products or other perks. This type of funding is picking up steam. Several people have raised millions of dollars using this kind of financing option.
6. Lending Club
Another way to get money with bad credit is to use a lending club. You can borrow at least $35,000 if you have a credit score of 660. The site got set up as a peer lending platform where you get to borrow money from the members of the club. Investors in your business can get up to 9 percent on their returns.
In conclusion, if you have bad credit, you can still get financing for your business. You will just have to use your Rolodex to find out whom to tap for money. You can use private lenders such as your former boss or a coworker. You can use factoring, or microlenders and web-based lenders. Additionally, you can utilize gifts and grants, social lending sites, or a Lending Club.
There is no need to stress. Do extensive research to find the necessary information. The internet is at your fingertips. Make use of all the valuable information online. You could become a millionaire.
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