Business Loans For People With Bad Credit

When you have your own business you may come upon times where you’re up against an unexpected situation and need a bad credit business loan.  In most lending situations your first choice would be to talk to your regular bank or another local bank.  While some will recommend that you skip this step to save time, I generally think it is a good idea to continue to build a strong banking relationship with one bank.

Another option is through a factoring agreement.  You contract with another company to give you money now at a discount rate based on anticipated future sales.  Sometimes this can be done with outstanding invoices or even work in progress.  Another possibility, if you have a credit card merchant account, is to use the expected monthly credit card sales numbers.  You probably have an average amount of credit card sales that can be trusted as future revenue.  This means you have low risk in receiving this future income stream.

The key is to present the factoring company with your past credit card processing statements.  This is the evidence you need to prove future income and get a business cash advance.

Factoring will get you the money you need now.  Since the repayment schedule is based on your revenue volume you don’t have to worry that the payment schedule is too much too fast.  The factoring company does not want to put you out of business.  They want you around to pay your obligations.  Typically the advance is rather short-term which may have a repayment of 6 to 12 months.  Once paid back new revenue is available for business growth.

Here’s an example.  Let’s say you get a factor of 1.3%.  This means that on a $10,000 cash advance you would be paying 30 cents on the dollar by the time you pay it back.  That is, your $10,000 borrowed becomes $13,000.  Then the hold-back defines how much is kept until your balance is paid.  In this same example, if the hold-back is 15%, then 15% of your future credit card sales go directly to the factoring company each day.  Looking at this on a monthly basis, let’s say your monthly credit card sales are $12,000.  15% of $12,000 is $1,800.  That would mean that $1,800 per month will go to the factoring company.  You will have paid off your obligation in just over 7 months.

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