You have to be prepared, when trying to get business loans with poor credit. A big bank won’t give those loans. It is also possible with each credit inquiry, your credit score may go lower.

You might have better luck getting a loan from a community lender, or a regional or local bank. Loan officers at such an institution might be more likely to consider not only your personal credit score, but also your business credit score. Your business credit history is associated not with your Social Security number, but with your business’s tax ID number. You will have a better chance of getting a loan with a poor personal credit history, if you have a business tax ID number and a good credit history associated with that number. If you have not gotten such a number from the IRS, get one as soon as possible. It is possible to get such a number without incorporating your business, if you have a business that is an LLC, a partnership, or a sole proprietorship.

If you have a business taxpayer ID number, a banker might consider the outstanding debt balance on your credit accounts and your bill payment history. As a result, if your business credit history is good, you will have a better chance of getting a loan–even with a poor personal credit history.

Another option for you might be a specialty lender, who specializes in loans for high risk entrepreneurs. If a banker or someone else recommends such a lender to you, or you find one online, be prepared to pay a high interest rate–although it might be lowered once you demonstrate you have money to cover your debt.

Other options for a business loan for someone with poor credit include family and friends or home equity loans. They may not be your first choice, but might be an option for you.

One final option would be to contact your local Small Business Administration or contact the national agency online. The SBA does guarantee some loans which others offer to businesses and also has a list of business friendly banks.

1. Cash advances. There are hundreds of companies that offer business loan cash advances. Yes, they are somewhat expensive and getting a bank loan is a lot smarter. However, getting a bank loan requires solid credit and if you don’t have it, you’ll have to look at other options. It’s generally quite safe for a lender to offer a bad credit business loan because many businesses have money coming in each month. Most lenders that offer this type of service will only offer you a loan if you accept credit cards. If you do, it’s easy for them to connect to your merchant account and get their money back. This really lowers the risk for them so most of the time they don’t really care what your credit looks like. These aren’t the cheapest loans out there but can get you by if you really need to make payroll or pay for some other expense.

2. Hard money loans are also pretty easy to get, even if you have bad credit. Most bad credit business loans are structured as a hard money loan because the lenders don’t have any other way to hedge their risk. You lay down an asset like a building or car that you own and the lender provides you with a loan for a set amount of time. These loans usually span over a few months. The lender will usually charge you a set percent on the amount that you need to borrow. This is generally one or two points (percentage points) if the loan lasts for a few months.

Heavy Disclaimer: Bank loans are WAY better than both of these options. Banks will give you better rates and the repayment terms will be a lot better. You won’t have to pay the loan off within a couple months. I know that I almost always say this – shop around! I keep hearning horror story after horror story of people getting hosed by bad loans, because they were too lazy to do their shopping.

Before we jump into that, let’s cover briefly why business loans are so risky, in general. The biggest reason that these loans are so risky is the lack of collateral. Sure, some businesses have real estate and other assets that can be used as collateral, but many others have little to no assets. These smaller businesses are going to struggle a lot more to get loans because banks are taking a huge risk on them. Business loans are obviously a lot riskier in this situation. When business owners can’t get loans from a traditional lending insitution, they often resort to alternative, riskier loans.

The first type of high risk business loan is the business cash advance. These loans are extremely expensive and only exist because businesses often have no other choice. They can work in the right situation but I would recommend proceeding with extreme caution if you decide to use one of these loans. The fees will be extreme and the consequences for lack of repayment are extreme, to say the least. I would never use one of these loans unless the alternative option was going out of business – something that a lot of people who take out these loans end up doing anyway. If you opt to take out one of these loans you’re heading down a path that’s a destructive one. You can’t afford to spend loads of money on crazy interest and fees if you expect your business to be a healthy one.

The next type of very common, high risk business loan is the investor loan. With these loans, you are generally giving up ownership in your business in exchange for funds. Sometimes these transactions are structured as loans and other times, investors are simply purchasing equity. Either way it allows you to free up funds that can be used to either grow your business or stay afloat.

Hard money loans are a third option that we should talk about. This option is extremely risky because you’re often putting down an asset that you’ll lose if you don’t make your payments. These loans generally don’t have any room for error – if you pay late you’re going to lose your asset. This is obviously a very risky option and I would recommend being extremely cautious if you’re considering using this type of loan.

If your credit score is under 650, you will probably have to look at other options because you aren’t a healthy risk for a bank. Banks aren’t in the habit of lending money to people who have struggled to pay their bills, especially if their business isn’t producing well. This means that you’ll either have to find a cosigner or look at other options.

Other Options

A very viable and unique option is the business cash advance loan. They aren’t the cheapest option out there in fact you can expect to pay a lot to be able to use this type of loan. However, if it’s your only option and you have enough cash flow coming to pay for it, it can be a lifesaver. I would definitely recommend thinking this type of loan through because the interest (they call it fees usually) can be quite extreme. Since getting bank-provided small business loans with bad credit is almost impossible, this might be your only option.

Getting this type of business loans is generally quite easy, as long as you accept credit cards. This takes most of the risk away from the lender, since they can tie into your credit card system to get their payments. This is a lot like a traditional payday loan or cash advance where they prefer that you get direct deposit from your job. That allows them to ensure that their payments will be available for quick withdrawal from your bank account.

Another option that you may not have considered is taking out a home equity loan. This is usually an easier loan to get than a business loan because it’s collaterized. That significantly lowers your risk with the bank and allows you to get a much lower interest rate. Using a cosigner for this option is also an option and can lower your interest further if the person who cosigns has solid credit.

I have several businesses of my own and also have close friends who own their own companies. When we get together to talk, it often becomes a vent-fest because of the difficulties we all face. I’ve been lucky enough to stay in front of my debt, but I’ve helped friends who need loans just to stay in business.

Economic factors have contributed to their lack in sales and this has made it harder to pay the bills. That is going to affect credit scores and therefore the ability to get loans.

Credit Score Required To Get Business Loans

In order to walk into a bank to get a loan, you’re going to need to have a FICO score of at least 650. Since many banks are distressed right now you may see requirements that are more strict than that. Depending on the bank you talk to, you may not be able to qualify with anything under 700.

This means that if your FICO score is under 700 you have some shopping to do. If it’s under 650, you can pretty much forget about getting a loan from the bank and you’re going to need to look at other options. There are some other options out there but you’re going to need to be careful. Taking on additional debt has consequences and you’ll need to create a solid plan and stick to it.

Other Types of Business Loans For Bad Credit

A very common type of business loan that quite a few businesses use is the business cash advance loan. The lender will generally take a look at how much revenue you pull in each month and will offer a cash advance on that income.

Another variety of this type of loan is when the lender takes a look at how much you generally accept through credit cards each month and then make cash advances based on that income. This is pretty common and these lenders can generally be found online.

As a person who has dealt with a lot of people with bad credit, I’d like to offer some simple advice. Before you take out additional business loans for people with bad credit, PLEASE try to improve your credit. Your business is going to suffer from paying extra interest and that isn’t something that any of us wants to go through.

If you decide that you need to get a loan or go under, make sure that you make a solid plan. This will help you to get back on track. If you can’t make the numbers work on paper, they probably won’t work. If you can’t put together a plan that makes sense, you are probably in a lot of trouble.

Since I have dealt with a bunch of these cases, I would highly recommend proceding with caution. Try to get out of debt and improve your credit as soon as you possibly can.