Consider alternative financing options Your ability to get a traditional business loan depends much on your personal credit history.
Small business loans invariably require a personal guarantee and a CIN or a TIN number. But, what if you do not have these? You can still get a business loan by looking at alternative financing.
Invoice financing: When you sell your outstanding invoices to a factoring company at a discount, it is called invoice financing. For small businesses that need a
positive cash flow but do not qualify for traditional loans, this type of funding is a viable option.
Also Read:A Quick Guide To Finding The Right Loan For Your Business Micro loans: Micro loans can be offeredto small businesses by micro lenders. Compared to loans given by online lenders, these micro loans have a repayment option of upto 7 years and are offered at attractive rates of interest.
Lines of credit:Many individuals and small businesses do not know about this form of borrowing. When you avail a flexible loan from a financial institution,which involves a defined amount of money that you can access as needed and repay either immediately or over time, it is called a line of credit. Lines of credit are most often used to cover the gaps in irregular monthly income or to finance a project whose cost cannot be predicted up front.
Business credit cards: A business credit card can also be used to get a line of credit and the credit eligibility depends on factors like previous loan repayment history. Bear in mind that while it is not difficult to get a business credit card, you might have to deal with a high interest rate.
Funding from family: Though it might not seem like the best option, one way to fund your business is through friends and family. Here, credibility, relationships and character matter more than your credit history. Also, make sure that you can repay the loan so as to maintain the relationship you have with the lender.
Also Read:Fuel Your Business Growth With Unsecured Business Loans Financial Institutions: You can also approach a financial institution for a loan,one that does not accept deposits but is authorised to give credit. One advantage is that although a financial institution or an online lending platform will charge you more interest, in most cases, they do not require a personal guarantee. However, since you cannot predict the trajectory that your small business might take, this option may load you with more debt if you already have a poor credit history.
Get advice from an attorney who specializes in credit-related issues If you are stuck with a poor credit score and cannot think of a good way to get funding, get advice from a lawyer who can help you with credit-related issues. You can
improve your credit score by maintaining a good repayment record for your personal or business credit card, personal or business mortgage, and car loans or utility bills.You should also try and maintain regular annual revenue and avoid applying repeatedly with the same lender who has rejected you once. The sooner you can fix your credit-related issues, the faster you will gain access to affordable financing in the near future.
Also Read:Step By Step Guide For Checking Your Credit Score Use assets as collateral to get lower interest rates There are certain financial institutions that might be more lenient with credit scores and are known to offer a loan even if your credit score is not too good. However, the rate of interest charged will be higher than usual. To counter this situation, while negotiating with the lender, you can use assets like equipment, house,
luxury car, gold, insurance policies as collateral to get lower interest rates.
So,keep your chin up and do not lose heart if you have a low credit score and are finding it difficult to get a loan for your business venture. Give the above methods a shot and you will get a loan sooner than you think.
