While traditional lenders have been sticking to their strict underwriting guidelines here are several creative business financing options that may just help get you the funds you need.
Before getting into the details let me be the first to remind you that separating your personal credit from your business credit should be your primary goal. If you’re at the early stages of building your company’s credit file then you may have to use your personal credit to secure financing until your company becomes creditworthy.
Merchant cash advance
This option has many benefits if you are in need of short term business financing. In a nutshell you are borrowing against future credit card sales in order to receive cash immediately.
Best of all you can qualify with bad credit, no personal guarantee and no collateral.
Some of the requirements are:
- At least 9 months in business
- Process $5,000 or more in monthly credit card sales
Finally your repayment is based only on your credit card sales and it’s automatically debited so you don’t even have to worry about a payment schedule.
Social lending
Lending networks like Lending Club and Prosper provide a way for you to obtain creative business loans that range from $1,000 to $25,000. Rather than go through the red tape that traditional lenders impose these networks make the process so much easier. You simply post a loan listing and set the rate you want to pay and they do the rest.
The rate is fixed and so are your payments but best of all you don’t have to take the loan if you don’t like the rate.
Some of the requirements are:
- Personal credit score of 640 for Prosper
- Personal credit score of 660 for Lending Club
- Debt-to-income ratio of 25% (excluding mortgage)
Even though you’re securing the loan using your personal credit the interest rate you will pay is much less than the rate you will pay if you use your personal credit cards for funding.
Vendor lines of credit
Another alternative to creative business loans is obtaining vendor credit from your suppliers and other companies whose products and services you can use. This not only helps you conserve cash flow but also builds your corporate credit file too.
In most cases you can qualify with no personal credit check or guarantee which supports your overall business credit building strategy.
Equipment leasing
When you need business financing for business equipment and you can’t secure finances through traditional sources like a bank than leasing is a viable alternative. You not only benefit from tax deductible lease payments but you also can get a buy-out option as well.
In addition you get a low fixed rate and a low down payment which is usually one or two lease payments upfront. Compared that to a traditional loan, where a bank requires up to 20% down of the total price of the equipment.
As you can see there are many creative business financing options that will provide your business the financing it needs short term or long term while you continue to work on establishing the creditworthiness of your company.
