Shield Funding Bad Credit Business Loans
A bad credit score can make borrowing difficult for any business owner. Even if your company has strong financials, and has been in business for more than 2 years, a bad personal credit score makes getting approved for a business loan with a bank very unlikely.
In fact, borrowing has become more difficult because of the economic fallout from COVID-19. Lending guidelines are not only stricter with banks, there has been a tightening in lending across the entire financial landscape. Many lenders just do not understand financing in a crisis so they are reluctant to lend regardless of credit history.
Shield Funding has helped countless business owners through the financial crisis of 2008, and is equally prepared to navigate the financial complexities from the Coronavirus and help get business owners the money they need when they need it most. We offer a variety of bad credit business funding options to help each business owner get a business loan that can work for their situation. If you are an existing business owner you are eligible to apply for a business loan with us no matter what your credit history looks like or the industry under which your business operates. Shield Funding will take every step to help you secure the funding you need.
Types of Bad Credit Business Loans
Short Term Business Loans
A short term business loan gives a borrower a specific amount of funding that they require for a fee that is added to the principal borrowed. The duration of the funding will be approximately 6 months to 2 years, and a payment schedule will be developed that works for the business.
Merchant Cash Advance
A merchant cash advance is a loan option if you have a business that processes credit card sales. It differs compared to bank business loans because you are not actually taking a loan, you are taking a contract to sell a percentage of credit card sales in advance of those sales. A borrower is given up front cash against future sales, and as those sales are generated a small percentage is deducted through your credit card processor until the money is paid back.
Working Capital Loans
This is another type of short term financing that offers working capital for bad credit. This type of funding is not for long term asset financing but best suited for short term operating expenses such as rent, payroll, and other every day expenses. This option has a quick turnaround with minimal paperwork.
Invoice factoring is a another way to provide collateral for, and receive a business loan. With factoring the lender makes a purchase of invoices from the borrower’s company and then will actually collect from the client, they may even run the credit of the client in place of the borrower. You basically sell the invoice debt of a customer at a discount.
The Typical Borrower
A bad credit business loan is a business funding option for business owners that meet one of the following criteria:
- A borrower that does not meet the requirements to receive a bank loan
- Someone that needs a business loan that has an extremely fast turnaround
- A borrower that needs a loan that does not require collateral
- A person that wants a loan option with little documentation required
The different bad credit options available vary in estimated duration of the loan, rates, approval amounts and some general requirements. The main requirements are that you own your own business for at least 2 months.
What is an Average Approval
Business loan approval amounts are generally based on monthly gross revenue deposits. Typically the approval amount ranges from 60% to 80% of monthly deposits, but in some cases it can go as high as 100%. So as an example, if a business has monthly gross deposits of $100,000 the likely approval amount would range between $60,000 and $80,000, and could actually go as high as $100,000 or more depending on the type of industry and the financial status of the company.
How are the Payments Structured
Once a business receives funding, depending on the funding type, payments are structured in a daily or weekly payment schedule over the course of the payback period. The payment amounts are based on the amount and duration of funding. A daily program would be calculated based on a 5 day business week schedule not including holidays. If your business qualifies for a weekly program then you can expect a one time weekly debit over the course of the payback period.
What is the Overall Cost of Funding
The cost of these bad credit small business loans depends on the factor rate in the contract, length of time of the loan, and credit history. An example of this type of funding would be $75,000 for 9 months at a factor rate of 1.29 (29% fee on the loan amount). That would make the cost of borrowing in this scenario $21,750, so the total pay back amount on a 75k loan would be $96,750. The payments would vary depending on whether the loan comes with daily or weekly payments. Use the calculator below to see an example of total cost scenarios for borrowing and the payments that can be expected to make on a daily or weekly basis.