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Finding Financing for Small Businesses: Creative Solutions

Sep 2, 2020

How to Find Financing for a Small Business with Bad Credit

Rocky economic times can make it difficult for small businesses to secure the capital they need. Many business owners have felt the negative effects to their credit during periods of decreased sales or temporary closures, making traditional lending options less feasible. Many are asking how to find financing for a small business with bad credit. Luckily, there are a few options available.

Traditional Capital Routes

Most small business owners are familiar with both debt financing and equity financing. Debt financing is very similar to any other kind of personal loan. A bank or private lender provides a lump sum of money that you can apply to various business needs, and then you make monthly payments with interest. Your credit score, however, is typically a crucial component of the approval process.

Equity financing is typically seen as a more drastic option, since you are in effect “selling” a piece of your business to another owner.

Small business grants are another option for businesses looking for capital. Grants seem immediately appealing to those with bad credit because they do not need to be repaid and your credit score is often not a consideration. Winning grants takes a great deal of time, however, as the application process is usually lengthy, and it takes time to research grants you may be eligible for. There is often stiff competition for grants as well.

Additional Financing For a Small Business with Bad Credit

Not everything hinges on the business owner’s personal credit score, however. While a useful rough number, a credit score is just a snapshot in time and much more goes into a business. For those looking how to find financing for a small business with bad credit, creative solutions consider additional factors.

Look for lenders that consider your years in business, relationship with your landlord, and business plan. This helps create a more complete picture of your reliability as a borrower.

Reliant Funding offers a short-term funding plan can consider  how much money you need to keep your business going through a few months. Flexible plans that consider rent, inventory, and pay can provide a more tailored solution than just a basic debt financing loan from your local bank.

If you’ve been in business for at least six months and have no open bankruptcies, you may also qualify for a merchant cash advance. Unlike traditional loans, borrowers can usually receive funds in as little as one business day and personal credit score is not the determining factor. These financing solutions can help your small business meet current obligations or set you up for future development. The funds can be used at your own discretion and have flexible repayment options.

It is best to find a funding solution that is as customized to your needs as possible. A family-owned restaurant will have a different operating structure than a string of storage bay companies, and so on.

Creating a Plan

Just like when you started your business, you will need a solid plan when you search for funding opportunities. It is easy to panic when you see red ink, but you may not need as much cash as you thought to make it through a rough patch.

Listing your current shortfalls and the amount of credit you think you need to make it through a slump will ensure you don’t overborrow. Considering other realistic cost-cutting measures may also help you avoid a similar situation in the future.

Setting Yourself Up for Long-Term Success

A short-term loan can be the lifesaver you need to get you through these difficult times. If possible, consider adjusting your business plan and the amount of liquid capital you keep on hand in the case of a future crisis.

Of course, promptly repaying your current short-term loan is one way to boost your credit score over the long haul. Consider other steps you can take to improve your overall credit health, like negotiating a workable rent plan with your landlord or creating a payment plan with other debtors you may have.

There may be short-term relief in place under the CARES act for you as well. Under the 2020 Act, some lenders are urged to report credit accounts as current if they have worked out a temporary arrangement with borrowers. With some creative thinking and a solid lender, you can find financing for a small business with bad credit and secure the capital you need for long-term growth.


$3,098,641,569 dollars funded