Starting a new business needs funds and finding bad credit business loans is always challenging. In the US almost two-thirds of all startups or small businesses start with a small loan. But, 2020 started with a bad scenario that put businesses across the world on hold. This meant no cash was flowing, no products were being made and things were on hold without notice. Yet, this is a time that can be spent analyzing the best lending agencies in the US which cater to borrowers with ‘Bad Credit’ or even no credit history at all.
What Score is a Bad Credit Score?
If you are worried that bad credit won’t let you qualify for a business loan, don’t be disheartened yet. Besides banks, there are several private lending agencies where you have a hierarchy of lending options, and while you may not qualify for the best rates and terms, you can still find financing from a private lender with some adjustments. But, what is a bad score after all? How much can you tolerate?
A person is categorized to have bad credit when they have a history of not paying their bills on time or borrowing too much money and not being able to repay. If a person constantly owes money to others, they might have bad credit. At the same time, if you are a constant borrower and repay in time, your credit history gets better.
In terms of score that can affect bad credit business loans, the quantitative number is a low credit score, typically under 580. The scale varies from 300 to 850, and that shows how good or how worse your score can be. If you have bad credit, you will find it harder to get loans or get a credit card for that matter.
Federal Assistance for Bad Credit Business Loans
In the US you can apply for federal assistance if you are a small business owner, and in 2020 this number has seen a steep increase. With several shutdowns and nearly-complete stops of cash flow, small and medium businesses are struggling to cope up. So now, they can receive funds from the government to meet their payroll through a paycheck protection program.
- The program costs the US govt. $349 billion.
- The stimulus package costs $2.2 trillion.
- This allows small businesses to receive money totaling 250% of their average monthly payroll in 2019.
- This has made it the best-selling business loan package in 2020 in the US.
- The loans can be obtained up to $10 million for a single business and can be used by the business owner’s discretion.
There are several other benefits as well such as a complete waiver of these loans provided your business meets certain conditions and requirements. That is, if no employee is compensated above $100,000 and at least 75% of your funds go towards paying your workers rather than board members or business owners, the entire loan can be forgiven.
However, the market needs more. The applications are rising in millions each day.
Private Lending Agencies for Bad Credit Loans
The demand is huge and increasing every day while the supply is stagnant and slow. This has allowed other players like Lendio or BlueVine to come up with more lucrative deals for those with bad credit. You don’t need a score of 700 or even 600 to qualify for one of these policies. For example, with BlueVine with a score of as low as 530, you can borrow starting from $5000 to $5 million in funds to protect your business from dying.
However, they do not have the benefits of the federal assistance we have elaborated above. This is the adjustment or the compensation that comes along with it. When they relax the credit checking and other formalities, the benefits shrink on the other end. You will end up paying significantly higher interest rates on your loan, for example.