Banks REQUIRE good credit to be approved, as you know. Most people only go to their bank when they need money. But the most common business bank loan, SBA loans, only account for 1.1% of all business loans (Department of Revenue 2013). The reality is that large banks are NOT the providers of most business loans. And while they require good credit to qualify, many sources don’t.

The SBA and other conventional bank loans are difficult to obtain because the lender and the SBA will evaluate ALL aspects of the business and the business owner for approval. To get approved, all aspects of the business and the business owner’s personal finances must be near PERFECT. There is no doubt that it is difficult to qualify for SBA loans. That’s why, according to the Small Business Loan Index, large banks deny more than 89% of business applications.

Private investors are a great source of business finance. They want an average or better credit score of 650 or higher in most cases. They will also want solid finances for at least two years. Think of private money as conventional bank and SBA loans that just don’t hit the mark.

Does the business have existing cash flow verified using bank statements, NOT tax returns? Does the business receive more than $ 60k annually in credit card sales? Does the company have more than $ 120k annually in its bank account? If the answer is yes, then income financing or business advances could be the perfect financing product.

Must be in business for six months for business advances and income loans. No new business can qualify and you must have 10 or more monthly deposits. Most of the advertising you see about “bad credit business financing” is these products. These are short-term “breakthroughs” of 6 to 18 months. Mainly short term at first, then when half is paid off, the lender will lend more money in the longer term. The loan amount is up to $ 500,000 and the loan amount equals 8-12% of annual bank statement income. For example, a business that has $ 300,000 in sales might get an advance of $ 30,000 initially.

With income and commercial financing, 500 credit scores are accepted and are COMMON with these types of loans. Bad credit is fine as long as you are not actively in trouble, such as bankruptcy, or have serious tax ties or judgments.

Collateral-based loans give you money based on the strength of your collateral. Since your collateral offsets the lender’s risk, you can be approved for bad credit and still get VERY good terms. Common commercial collateral can include accounts receivable, inventory, and equipment.

With accounts receivable financing, you can secure up to 80% of accounts receivable within 24 hours of approval. It must be in business for at least one year and the accounts receivable must be from another company. Rates are typically 1.25% to 5%.

You can also use your inventory as collateral to finance and secure inventory financing. The minimum inventory loan amount is $ 150,000 and the overall loan value (cost) is 50%; therefore, the inventory value would have to be $ 300,000 to qualify. Rates are normally 2% per month on the outstanding loan balance. The example is a factory or a retail store.