Business loans with bad credit may sound contradictory, but there are business financing options for the credit challenged entrepreneur.
September 21, 2010 – Fredericksburg, VA — Business financing is challenging enough in the best of circumstances. When entrepreneurs and business owners are faced with having to search for business loans with bad credit, constant rejection takes its toll, leading to frustration, anxiety and hopelessness. Fortunately, there are solutions to this confounding problem.
Mike Lieber, president of AEGIS Financial Solutions, Inc., and creator of the new business financing web site Smart-Business-Financing.Com (http://www.smart-business-financing.com), says businesses loans with bad credit are not only possible, they are done every day, despite the sour economy.
“We recently helped a retail shop owner with a credit score in low 500s open a line of credit to purchase inventory for the upcoming holidays. Getting business loans with bad credit is not as difficult to get as most people might imagine,” he says.
The term “bad credit” is actually used interchangeably to describe two situations a business might find itself in: Little or no credit, or credit damaged by derogatory accounts.
The key, according to Lieber, is preparation. A business owner with credit problems and a little time can take action to build business credit that stands on its own, separate from the personal credit history of the owner.
“The business owner can do this himself, which takes time and patience, or he can hire a specialist in business credit to do it more quickly and accurately,” Lieber says.
In either case, establishing business credit requires the owner to:
• Apply for a federal tax ID number (FEIN) and establish a legal entity, such as a corporation or limited liability company (LLC0.
• Obtain loans and/or credit cards in the business’s name.
• Pay back all bills and loans on time to create a positive trade history.
• Generate consistent cash flow to demonstrate the company’s capacity to repay business credit lines and loans.
Business credit services firms expedite the process by handling many of the tedious administrative details and helping their clients with the difficult task of obtain financing in the name of the business.
If the need for funds is critical, the business can tap the so-called “non-conforming” market for immediate working capital financing while simultaneously working to build its credit profile.
Non-conforming financing is typically more expensive than more traditional methods of business financing because commercial lenders will consider the risk of default to be higher for borrowers with poor credit, particularly in tight economy.
The pages of Smart-Business-Financing.Com contain information on time-tested financing methods that place little or no emphasis on the credit of either the company or its owners. These techniques fall into the category of asset-based finance and include accounts receivable financing, business equipment and commercial real estate financing and credit card factoring, which allow a company to leverage its assets – or in the case of credit card factoring, future credit card sales — to get needed business capital.
For businesses with few assets or no credit card sales, the owners are forced to search for unsecured business loans with bad credit. According to Lieber, there are positive and relatively quick measures the owners can take to make the company more attractive to prospective lenders and to achieve the best interest rates and loan terms possible.
• Thoroughly review the personal credit histories of all owners for accuracy and completeness.
• To the extent possible, clean up any outstanding collections, charge-offs and judgments.
• Develop a well-written business plan that clearly explains all business financing requirements and how the business will be able to meet its repayment obligation.
These basic steps both increase the chances of finding suitable business financing now and improve the prospects for obtaining the cheaper, more traditional financing in the future.
About AEGIS Financial Solutions, Inc.: Founded in 1998, Mike Lieber’s company has been on a mission to help people solve financial problems and get money when they need it most, using the fast and flexible resources of the cash flow industry.
Mike Lieber, President
AEGIS Financial Solutions, Inc.
88 E. River Bend Road
Fredericksburg, VA 22407
PH: (540) 548-2270