Businesses run smoothly when there is a healthy cash flow. Quite often, small businesses are crippled by inadequate cash flows. As a result, entrepreneurs, who start with great ideas, find it difficult to run day-to-day operations efficiently and eventually fail to progress in their ventures.
Small businesses account for 54% of all sales in the United States. A large percentage of them are underbanked and are in need of financial assistance. There are 88 million Americans who are underbanked and are denied mainstream financial services.
Small businesses get loans based on their creditworthiness. And often due to poor credit score, they are denied one at an affordable interest rate. If we observe, it has become a recurring fashion to witness businesses failing to sustain for a longer time due to lack of funding.
But regardless the underbanked status, it is possible to get your business off the ground smoothly. Here are some ideas to make that happen.
Look for Alternate Funding Programs & Solutions
Early stage entrepreneurs or small business owners often find themselves dealing with poor credit scores disallowing them to take financial aid from traditional banks. However, there are certain lending programs that rely less on credit score, and more on other factors.
If your business is regular in monthly deposits, then you can easily take revenue-based loans. Even if you find interest rates slightly higher than traditional bank rates it will balance with the fact that there will be no requirement for collaterals.
Merchant cash advance, also known as credit card sales receivables or short-term business loans is another funding program that offers a line of credit despite bad credit score.
However, if you are very selective of these methods, having a business partner with good credit score will also work for you. Though, your potential business credit partner should agree to work through the challenges on congenial terms.
Seek Friends & Relatives
While banks evaluate your potential on your credit score, your well-wishers may think otherwise.
Entrepreneurs or small business owners who are underbanked can always seek assistance from people who value trust and relationship. Since you will be asking financial assistance, you should demonstrate your adequacy with a good business plan and make sure that your expectations are realistic.
Approach Microlenders & Non-profit Organizations
Unappealing credit profiles often creates distance between traditional banks and small business organizations. Regardless, businesses are financed by certain institutions that are ready to overlook the lack of verifiable credit history in their community.
Non-profit micro-finance institutions usually lend $50,000 or less for start-ups and small companies. In addition to loans, they provide one-on-one assistance, as in business support services and this facility is not offered by traditional lenders.
Sans good credit history, businesses looking for a smaller amount of capital can expect microlenders to provide value-added services and quicker financing.
Look for Great Opportunities in Grant Programs
Nothing sounds better when your small business is offered free money. Yes, aspiring entrepreneurs and small businesses can find good financing opportunities if they turn to government-sponsored grant programs or those offered by non-federal entities.
Grant programs offer a sum of money that never has to be repaid. These programs are hard to qualify for, but once you score a grant, it’s an easy ride for your business – no apprehension over interest rates and term length.
Identifying suitable funding options is all it takes and entrepreneurs should never hold back just for the reason that the credit score is low or nonexistent. All recommendations listed here will help you make better financial decisions and gain momentum in your low-running business.