How to Get a First-Time Business Loan with Bad Credit

March 2019

Convincing a bank to extend a loan to your newly-opened small business is similar to convincing an employer to hire you for your first job. You have no experience, so they won’t hire you. And to get experience, you need someone to hire you. It’s enough to drive you insane.

Banks operate the same way. They like to loan money to people who don’t really need it. They also like to loan money to people they have lent money to before. They don’t like risks. And your new business is a risk, because there’s not enough history for a bank to determine how things are going to go.

You might be able to get a loan based on your personal credit rating, your collateral, and other factors. But wait – your credit rating isn’t in the 700+ zone? You have a problem. Thankfully you also have options.

Small Business Loan Alternatives

Alternative funding sources provide working capital and other forms of financing for small and medium-sized businesses whose owners need to access funds quickly and/or don’t qualify for more traditional loans from a bank. They tend to be far more flexible than banks and credit unions. For example, an alternative funder may work with businesses that have revenues as low as $5000 a month. Business owners don’t need to have perfect credit scores to be approved for funding.

There are other benefits to working with alternative funders. The application process is likely to take minutes, not months. And the types of funding available, such as invoice factoring and merchant cash advances- are designed to meet the needs of smaller businesses. That said, alternative funders are taking a risk working with people who don’t qualify for standard bank loans, so fees and interest rates are typically higher for borrowers when compared to a traditional bank loan.

Where do you find alternative forms of small business funding when you have bad credit? Typically, online. Companies like One Park Financial expedite access to fast funding, simplify the qualification process, and help connect you with a funding provider that meets your needs.

Obviously, alternative lenders are filling a real need. A recent report by investment banking firm Morgan Stanley states that “We believe that alternative lending is here to stay. Indeed, we expect its growth trajectory to continue, reflecting the potential benefits of the asset class to both borrowers and investors. Positioning investors at the intersection of technology and finance, alternative lending may provide diversified exposure to a secular shift in the way that consumers and small businesses access capital. their lending to small businesses.”

Types of Alternative Funding for Bad Credit

Invoice Financing/Factoring: it’s not uncommon for small businesses to wait 30-90 days for invoices to be paid. When business is slow, those unpaid invoices can cause significant cash flow problems. An invoice financing loan provides expedited access to funds. There are two options for invoice financing: a factoring loan and a discount loan. With factoring, the lender funds the borrower with a portion of the amount due on invoices. The lender then collects the full invoice amount, plus fees and interest. With invoice discounting, the funder loans the business owner a percentage of the invoice, but the business owner is responsible for collecting the payment, and paying back the loan along with fees and interest. Since this is an advance on payments owed to you, your credit rating isn’t the primary qualification factor – your client/customers’ payment history is more important when determining whether you qualify for funding.

Equipment: provides funding up to 100% of the value of business equipment owned by a small business, such as computers, vehicles or machinery. The equipment is the collateral for the loan, making this an option that may met the needs of business owners who have substantial equipment assets but will low or no credit ratings.

Merchant Cash Advances (MCA): these are advances on future revenue and are paid back via a percentage of the merchant’s daily or weekly sales. For small businesses that see daily transactions, such as restaurants or shops, this can provide an easy way to access funds quickly and pay back at a pace that aligns with your business cycle. Your credit score isn’t the primary qualification factor here, funders look at a business’ receipts to determine whether to approve the advance, so small business owners with low credit ratings are often able to get approved for an MCA.

How to Get Bad Credit Business Funding

One easy way to get started is by getting pre-approved by One Park Financial, which then gives you access to a funding expert who can discuss your business needs and options to determine what funding types best meet your needs.

Alternative funders typically are happy to work with businesses that have been open for three months or more and have revenues as low as $5000 a month, and funds are typically available within 72 hours. Business owners don’t need to have perfect credit scores to be approved.

One Park Financial works to help owners of small and mid-sized businesses access the funding that meets their needs. Established in 2010 and founded by entrepreneurs, One Park Financial understands the challenges associated with small business loans and their need for working capital. Visit or call 855.218.8819 and connect with a funding expert to discover the options that make sense for you and your business.