One of the biggest roadblocks to receiving credit to help grow your small business — especially from a big bank — is a poor credit score. In fact, if you have a score below 700, most big banks won’t even give you the time of day.
This can be a problem if you need funding to help grow your business.
Thankfully, there are solutions to help you land that funding, even if your credit score isn’t stellar. Here are some of the best options:
Credit Unions and Small Banks
Small banks approved nearly half of all small business loans last year, compared to the less than 10 percent approved by big banks. The biggest difference between credit unions or smaller banks and the big banks? Credit unions and smaller banks are entwined in the community that you operate your business in. They have a better understanding if your business will succeed and if you’re good for paying back the loan in a timely matter more than a big bank would.
Micro-Lending Services
Micro-lending services won’t give you a huge loan, but they might be able to give you just enough money to give your small business a kickstart. The best part about micro-lending services is that the process is relatively simple and it doesn’t take much to convince your loan agent. The bad news? Interest rates tend to be high and you have to pay some upfront fees.
Cash Advance Programs
Cash advance programs can provide your business with a loan and also help it increase its chances of success. These programs examine collaterals and private properties, all while ignoring your credit history. One you’re approved, the loan is immediately deposited into your account and only a percentage of your total earnings is deducted monthly.
Private Lending Options
Next to a small bank, private lending might be the best option because its flexible. Of course, it can be difficult to receive. Most private lending options come from family or friends. These people, although they care about you, need to know you’re going to be able to pay them back in the agreed timeframe. Of course, the best part about these loans are that they tend to be interest-free. Your family and friends want to help you out. The worst part is the potential strain it could put on your relationship with these people. If your business falls through, and you’re unable to pay, things could go sour real quick.
Kickstarter
Crowd source funding is becoming more popular, but it’s definitely not for every small business owner. Using a website like Kickstarter requires you to have a specific idea or product that you need funds to execute. If you can pitch the idea in a creative way and entice people to the point where they really want your product, then they will invest and give you money to execute your product. This is a great option because you’re raising money that you don’t have to pay back with interest. The people that want your product believe in it and just want the product — not their money back. Of course, if your product becomes extremely popular, you’ll have to make sure you can deliver on it. Expect to see more types of Kickstarter-like websites in the future.
Andrew Dodson is a small business blogger that understands the best banks for small business.
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