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5 Top Options For A Startup Small Business Loan With Bad Credit

“Can I get a startup small business loan with bad credit?”

This is one of the most asked questions by entrepreneurs having poor credit ratings.

Being your own boss demands quite an effort, and money is the basic requirement that every startup needs for smooth business operations. In fact, statistics show that 22% of startups fail within the first year and 30% of these failures result from the lack of money.

Getting money from traditional lenders is a challenge as they have strict eligibility criteria that includes credit rating, years in business, annual revenues, and more.

But don’t worry.

You can always kickstart your business operations by obtaining the required capital, even with bad credit.

There are various financing options other than traditional loans that can help you get quick, reliable funding for your startup.

Below is a list of five top start-up financing options other than traditional lenders to get a quick loan- with bad credit.

1. Friends and Family Borrowing money from your friends and family is one of the most convenient ways of financing a new small business. However, they may hesitate to lend you money if you have bad credit. You’ll have to convince them that you’ll pay back the loan on an agreed time period.

2. Crowdfunding Crowdfunding is a popular way of raising money for small businesses. You can opt for online reward crowdfunding where you can give donors gifts instead of paying them back.

However, crowdfunding is a time taking process and you may find it hard to convince donors to contribute toward your campaign.

3. Merchant Cash Advances Merchant cash advance offers you quick capital funding in the form of a lump-sum amount without affecting your credit rating. You don’t have to pay back the loan on a fixed schedule, rather you pay a percentage of future credit card sales.

However, cash advances come with high interest rates, making them an expensive financing option over the lifetime of a loan.

4. Credit Cards You can use small business credit cards for funding- with signup rewards and other bonuses on business purchases. Many cards offer no annual fees, but others might limit you to secured credit cards- having higher fees- if your credit is not stellar. It means that credit cards can be an expensive option if you have bad credit.

5. **SBA loans and Microloans** A microloan program offered by the U.S. Small Business Administration (SBA) offers loans of up to 50,000 for startups, small businesses, and also non-profit child care centers. Flagship 7 (a) loan program by SBA offers loans to startups to help them start a business.

The best thing about SBA loans is you get financing from trusted, reliable government funding sources. You can get a loan at competitive interest rates even with bad credit.

Various online lenders can help you get SBA loans by connecting you with an intermediary lender in your local area, making it easier for you to apply for a loan.

If you wish to apply for an SBA Microloan, Sba50k.com can help you. They not only help you find a local lender but can also prepare a business plan for you and submit information to the lender on your behalf. Click here to get in touch with Sba50k.com. They have been helping people get SBA Microloan’s for over 10 years. They can increase your odds of getting approved by 68%

They will show you how to cut through all the RED TAPE!

ALSO READ: The Importance Of A Well Written Business Plan

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Getting money from traditional lenders is a challenge as they have strict eligibility criteria that includes credit rating, years in business, annual revenues, and more.

But don’t worry.

You can always kickstart your business operations by obtaining the required capital, even with bad credit.

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A well-written business plan acts as the magical key to the success of your company. Never neglect to draft one for your new start-up. If you don’t know where to start, you can always take the help of SBA50k, who are pioneers in helping new businesses and creating a foothold in the competitive market. Don’t wait. Write a good business plan for your new business today!

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Business Plans: Why They Are Important

Have you decided to apply for an SBA MicroLoan but are unsure why they asked for a business plan to file the documents? Do you find the whole process a tedious one and feel lost without any guidance?

Don’t worry! This article intends to throw light on the importance of a well-drafted business plan for your company and how to write one?

What is a business plan?

It is crucial for any organizational growth. It helps to pave the way to gain loans for your company very smoothly. Any new business should invest a fair amount of its time drafting a business plan, which clearly describes your ideas and vision for the company.

In case you haven’t thought of writing one for your new business, it is high time you draft one ASAP. A good business plan helps you stick to the business objective and aim for the growth you intend to achieve. It will also help you get microloans irrespective of your poor credit history and lack of funds.

Why is it essential to have a business plan?

A good business plan in place ensures the strategic growth of the organization. It also proves to be a guiding star for your company’s success and helps you not get deviated at any stage.

Listed below are the benefits of a good business plan.

1. Helps in gaining loans:

As stated earlier, a well-drafted business plan helps in getting quick loans. It’s a universal truth that running a company is not easy, and you should be prepared to face the ups and downs on the way. A smart businessperson never invests all the funds in the business.

MicroLoans always help you create the basic foundation for your business. It would help if you never ruled out that your business might require the support of these loans.

So, in times such as these, a good business plan helps you get the much-required loan for your business.

2. Helps in taking a strong stand:

As an owner of the firm, you have to take a strong stand for the company’s profit at times. A good business plan helps stay focused on the plan and strategies adopted for the business growth. A business plan lets you focus on the company’s financial aspect and lets you pay attention to HR management, IT support, Customer service, and employee growth.

3. Helps to analyze the strong and weak points:

It helps you reflect on your ideas as the company grows. You can quickly point out which aspects you should focus on and where you should invest more of your resources. This could be the best way to correct mistakes you might have made and reflect upon them. A full-proof business plan will guide you and help you avoid the pitfalls you are bound to encounter.

4. Helps you draw the attention of other partners:

A business can’t be run alone, and when you have a business tied up with partners, a good business plan helps to clear any misunderstandings. At times of difference of opinion, a business plan comes in handy in presenting your company’s ideas and vision. It will help clear the misunderstandings and build other partners’ confidence in your vision for the company. A good business plan would help you secure the stakeholders’ valuable trust, who could turn into future investors for your business.

How should you draft a good business plan?

Now that you know the importance of a good business plan, let’s look at the key points to be kept in mind while drafting a business plan for your company.

Suppose you are confused about how to draft your business plan; it is ideal to start using a universal template that is readily available online. Or you can take the help of SBA50k. We are experts in writing a business plan and assisting small businesses in availing the SBA MicroLoan.

Listed below are the key characteristics of a good business plan:

Stick to a template:

It should be well-drafted. You can choose to pick the conventional ones available online or decide to write one on your own. Whatever be your choice, it is always advised to stick to a template. Don’t try to mix two or three templates while writing a business plan, as it would create confusion and won’t help in your business growth.

Include all the essential points:

Your business plan should speak about the products that your company deals with, who your customers are, how you intend to start the business, what you aim to achieve by starting the business, operational aspects of the company, stakeholders or partners involved, the structure of the organization, and other important details.

Funds operation:

Funds play a vital role in business growth and are an essential aspect of any business. A good business plan should clearly state what you intend to do with the funds and how you will use them to boost the business. If you have already availed a loan, you should explain how and where the funds are invested and how you intend to repay them while helping the company get a good hold in the market. This also comes to your aid if you plan to re-apply for a business loan in the future.

Financial projections:

Planning your funds should be in line with your loans’ repayment capacity and keeping the transactional documents in place. Each penny spent must be recorded systematically. And as an owner, you are accountable for the funds spent. Keep track of the financial records and credit reports in place. Don’t forget to maintain a record of the taxes paid and of both accounts payable and received bank statements.

Re-visit:

It would help if you went through the business plan at frequent intervals to keep adding any improvements required for your company and avoid the pitfalls. Make sure you also have a word with your lender, who would help you stay on track.

Take away words:

A well-written business plan acts as the magical key to the success of your company. Never neglect to draft one for your new start-up. If you don’t know where to start, you can always take the help of SBA50k, who are pioneers in helping new businesses and creating a foothold in the competitive market.

Don’t wait. Write a good business plan for your new business today!

ALSO READ: SBA MicroLoan - A Complete Guide

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SBA MicroLoan: A Complete Guide

As a small business entrepreneur, financing is essential if you plan to start a new project or expand your business venture. Though you may encounter numerous options to avail capital, being a start-up, you may not qualify for most of them. That’s when the SBA MicroLoan Program comes to the rescue!

SBA partners with various nonprofit organizations in the US to offer multiple benefits and Microloans to start-ups and small business ventures. Wondering if the SBA MicroLoan Program is the best choice for your venture? Peruse on to learn more!

What Is an SBA Microloan?

The SBA MicroLoan Program offers assistance to small business entrepreneurs, low-income individuals, women-owned ventures, and minority-owned start-ups. With this financing program, business entrepreneurs can borrow up to $50,000, with a repayment term of up to six years.

In the SBA MicroLoan Program, the federal government offers loans to specific nonprofit community-based ventures — who act as intermediary lenders, at a discounted rate. These intermediaries play an active role in lending out business loans to small businesses and start-up ventures. Start-ups use SBI Microloan for numerous purposes, such as purchasing supplies, machinery, furniture, fixtures, equipment, or working capital.

Due to its low-interest rates, this funding is ideal for businesses that need small capital with long repayment terms. Self-employed and even home-based start-ups can avail of these loans through this program. However, you cannot use this funding to purchase real estate or refinance your debt.

How Does SBA Microloans Work?

To obtain the SBA Microloan startup fund, businesses will have to work directly with the community-based or non-profit organizations that serve as the microlenders. These intermediaries have to meet SBA’s minimum requirements to obtain this loan and mostly require collateral if any. However, the borrowers may not have any collateral to avail of the loan.

As for this microloan’s standing operating procedures, it encourages the intermediaries to be creative while accepting the collateral for the loan offered. The Microlenders can, in turn, offer technical assistance free of cost to enable start-ups to attain success.

Using this program, borrowers can apply for a loan up to $50,000 through a microlender. In this program, borrowers can get loans of $14,000 to $15,000 on average. The minimum amount a business entrepreneur can apply for is $500.

The best part about SBA MicroLoan compared with the other funding options is that — SBA takes a backseat when it comes to setting any terms and costs. The only criteria set by the SBA is the borrowing cap of $50,000. The rest of the details, such as qualification requirements, rates, and loan terms, are set by the intermediaries. The Small Business Administration does not review even the loan applications for creditworthiness. Due to how it functions, SBA microloans are also known as SBA start-up loans.

The Benefits of SBA Microloans

SBA Microloan is an affordable capital source for start-up entrepreneurs and self-employed owners who have tried multiple times and failed to acquire loans from other funding options. Small business owners usually find it hard to acquire small loan amounts from traditional financing institutions. Here are some of the benefits they offer.

Loan repayment terms:

Start-up ventures usually require short term loans to get their business running. More often, you will be faced with the challenge of having to repay the loan within a few months. When it comes to an SBA MicroLoan, it has a repayment term that extends up to 6 years — where the monthly payments are quite affordable for small businesses.

Eligibility criteria:

This funding program is eligible for both start-up organizations as well as established companies. It’s an incredible option for business owners who have a limited credit history — as they might be new to starting a business in a country. This funding program is also available for freelancers, sole proprietorships, and ventures with zero or few employees.

If you find it hard to get loans from traditional lenders, getting approval for SBA Microloan stands a better chance.

Interest Rates:

Most business loans offered by traditional lenders have huge interest rates and high fees. When it comes to the SBA Microloans, the average interest rate for the financial year 2020 was 6.5%. Additionally, borrowers can negotiate the rates with the Microlenders, and the interest rates normally range between 6% to 9%.

Application procedure:

The specially designated Micro Lenders offer loans to the applicants and assist them with the application procedure. As most of these borrowers have encountered some bad experiences in the past while trying to obtain funds, these intermediaries offer the best services available. Also, they make sure that you receive the SBA Microloan startup funds to get your business running.

What Are The Eligibility Requirements For SBA Microloans?

Although SBA does not review creditworthiness applications, they do have certain basic parameters to be fulfilled by the start-ups to meet the loan eligibility requirements. In addition to these criteria, the Microlenders will also have their own SBA micro loan qualifications requirements. The requirements vary for different microlenders. Some request for the business’s credit score and also of the owner, the age of the business, and so on, whereas some don’t.

When it comes to the SBA microloan qualifications, borrowers need to meet the following requirements.

Venture experience:

SBA microloan program is best suited for self-employed and home-based ventures that require small loan amounts. Nonprofit childcare centers are also eligible for these microloans. All start-up organizations and small business ventures qualify to apply for the SBA Microloan program.

When it comes to organizations that require huge funding amounts that go up to $5 million, must opt for the other SBA funding options. Additionally, it is a must for all businesses that avail of this loan to have an industry experience of a minimum of two years.

Average credit score:

The requirements for the creditworthiness of the borrower keeps varying based on the microlender. Most intermediaries do not need an excellent credit score for availing of the loan. On average, borrowers need to have a credit score that ranges between 550 to 675 when applying for the SBI Microloans. Since most of the intermediaries are flexible when it comes to creditworthiness, borrowers can talk with the lenders to acquire more specific details.

Certain aspects like foreclosures or bankruptcies can make the SBA micro loan qualifications quite challenging. If your creditworthiness happens to be very low, you can get a cosigner with adequate income and credit to repay the loan, if needed.

Loan repayment ability:

Ultimately, the micro Lenders are more concerned about whether you will repay the loan. To prove your repayment ability, you can either show your organization’s existing cash flow or your financial projections if your start-up venture hasn’t generated any profits yet.

Additionally, you must submit your business plan to avail of the SBA Microloan startup funding. To stand a better chance of receiving the SBA loan, it’s advisable to create a solid and professional business plan, clean your credit score, and be prepared with your personal guarantee or collateral.

Collateral guarantee:

Generally, the SBA Microloans require some sort of collateral to guarantee that they will get their money back in case of any default. However, this requirement lies at the discretion of the non-profit Microlenders.

Personal assets such as houses, cars, personal property, and business assets such as accounts receivables, machinery, equipment, and real estate may be required as collateral.

Additionally, a business entrepreneurs’ guarantee with a 20% stake in their business is essential for acquiring the loan.

Lastly, the borrower must be a law-abiding permanent resident or a non-citizen in the US that holds a work permit.

SBA Microloan Rates

The rates for the SBA microloans keep varying based on the microlender you choose. Here’s why? SBA takes a backseat when it comes to setting the loan standards. Most non-profit microlenders have set an average rate that offers your insight into the amount you need to repay for the loan taken.

SBA offers entrepreneurs a maximum borrowing amount of $50,000 with an average interest rate between 8%-13%. Certain MicroLoan intermediaries offer funding options as low as $500. Based on the borrower’s business experience and purpose of using the loan, they will have to pay a down payment for acquiring the SBA MicroLoan.

Though it’s not always necessary, start-ups need to pay an average of 20% as a down payment. When it comes to business acquisitions, the down payment is only 10%. In most cases, funding is available with zero down payment — if all the other necessary criteria are met.

The maximum repayment term length that SBA offers for this microloan is up to six years. The loan repayment frequency offers you the flexibility to make monthly payments — that are affordable for most business owners.

Final Thoughts

Though the SBA MicroLoan program offers an incredible opportunity for most small business ventures and start-ups, it may not always be the perfect option for your organization. However, if it happens to be the right choice for your business, you will be able to avail of the loan that’ll help you fund and grow your business ahead.

With this small amount of capital, you will be able to get your business running in the right direction soon!

ALSO READ: Complete Manual on Government Small Business Loans For Women

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Women's Guide to Government Small Business Loans

Business scenarios around the Globe are constantly changing dramatically, and the point to be noted here is, it is a positive one. One that we should cherish and uphold with pride.

As per statistics over the years, the business world witnessed a huge paradigm shift. About close to 47% of Female owners took the front stage in venturing new business last year while the counterparts are trailing behind with 44%. Although women can show positive growth in handling business and venturing into a new business, they are still trailing behind the men when it comes to bagging business loans.

What could be the reason for this?

Reasons For Low Loans Application Rate:

Fewer percent look for loans: It is noted that only close to 25% of women look for investors for their start-ups.

Use a credit card: Close to 46% of women entrepreneurs use credit cards to meet the immediate cash need instead of looking for loans.

Funds declined When compared, men (34%) tend to get loans quicker than women (31%).

Let’s first discuss why and when women entrepreneurs should opt for microloans?

Despite all the growth and huge percentage of profit earned by women entrepreneurs, it’s a sad case that not many understand the importance of a business loan or, say, Microloans for women for start-up companies.

It is very important to understand that these loans come with varied benefits and prove to be a boosting factor for smooth cash flow. Women entrepreneurs should opt for these microloans for women before setting the business or post when they find that financial crunch to expand the business.

What type of business or Microloans can women look for?

Women can look for any one of the below-mentioned funding options based upon their business requirements.

A business line of credit:

In a layman’s language business line of credit is similar to how you use credit cards, where it comes with a limit cap, and the borrower can use the amount as and when required. The payments can be made partially or fully.

Revolving line of credit:

These are the most flexible and sought-after types that many borrowers prefer. The revolving line also has a credit limit, such as the business line credit, but here as long as the borrower pays the minimum amount, she can use the rest of the amount for business’s smooth functioning’s.

Peer-Peer loan:

Herewith the help of an online platform, you get in touch with the investors, and the borrower receives funds for her business. The peer-to-peer loan method is not essential to know the investors; the online platform functions as the third party and works as the mediator.

Short-term business loan:

These can be called stop-gap loans; they give you that small space to catch up with the market and lets you stay focused on the cash flow. Short-term loans are availed only when you are in the real crunch of money, and you know it is only a momentary thing, and you would be back to the high note of business functioning soon.

Business credit card:

Similar to the regular credit card that we use, but this is used for only business purposes. Instead of using cash to meet the expenses, you use the card to get the items and meet the business requirements.

Working capital loan:

This loan helps to analyze your firm’s daily expenses and compare them with the firm’s ability in handling finance and short-term financial performance. This method would help in making better judgments and run the firm without a cash crunch.

Microloans:

These loans are for businesses who don’t hold excellent credit scores but wish to start a business. Microloans are aimed at a small business that fails to catch the attention of great players in the market; with microloans’ help, they are given a fair chance to compete in the market.

Here are the various sources through which women entrepreneurs can gain extra funding for their business.

Women’s business centers:

Any new female entrepreneurs who feel lost and unsure where to start can take the help of Women’s Business Centers spread across various parts of the USA. They offer guidance, training, and also funds for small businesses for women.

SBA’s Women-owned business portal:

SBA is your go-to guide and helping hand when looking for someone reliable to support you. SBA helps in funding your new start-up and provides training, upscale your management skills, and guide you through the key points of running a business.

National Women Business Owners Corporation:

In case you already kick-started business and are struggling to gain a new customer database, as a new women entrepreneur, you can always take help from National Women business owners. They would help you gain potential clients’ contacts and help you place your firm in front of potential customers.

US Women’s Chamber of Commerce:

With the help of the US Women’s Chamber of Commerce, you would not gain financial support; however, you can definitely get access to various policies that should help your firm grow. Of course, not to forget, you would get access to the advocates who would help make your firm a better place to work.

Womensphere Venture Incubator:

Women in the field of science, technology, mathematics benefit a lot from this organization. The Womensphere helps to upscale your skills in the field and enables you to launch your firm’s right from scratch.

Various Grants:

Various women-centric grants that women entrepreneurs can avail of before reaching out for investors’ help. These grants would help them set their business with funds; the receiver doesn’t have to repay the amount.

These grants are provided to women who are from different backgrounds. Women entrepreneurs can also look for state grants to see if their business is eligible for the grants.

Conclusion:

Women have put in enormous effort in gaining a foothold in the field of business. With government-backed programs, women are very soon to lead the nations.

Strong management skills, incredible vision, and great energy are ready for the world with a new force.

If you are a budding woman entrepreneur and have a unique start-up plan, what are you waiting for?

Go, grab the loan that suits you and conquer the world!!!

ALSO READ: Your Complete Guide For Start-Up Business Loans For Women

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Your Complete Guide For Start-Up Business Loans For Women

You can’t deny that women have the in-built natural talent to run a business compared to their counterparts.

If we go by the record and statistics today, over the decades we can see close to 114% of growth in women entrepreneurs running their business out in the world. Well, no surprises over there as women run a family so beautifully that it is no wonder they are good at handling finance and business.

Despite all these positive aspects, can you believe women struggle to get a loan for their start-up? Not unless they have a back-up agent who could support and navigate them through the process, women can’t get the loan amount approved.

Facts You Should Know About Women Entrepreneurs:

Worldwide close to 36% of small businesses are run by women.

The state of California, USA, has close to 1.3 million Women-owned Organizations.

Trailing behind is the state of Texas, which has more than 860,000 firms that Women run

Approximately close to 1.9 trillion dollars are generated by women-owned firms.

Each year close to 15% growth is noticed in the firms run by women.

Why is it difficult to get microloans for women?

Globally, we do see women climbing the ladder of success and creating a name for themselves. But, at the ground level, the fact remains the same and harsh, “In the business world, women are far away from the finishing line.”

Do you know why women fail to get the much-needed support irrespective of the high rate of growth and achievement shown in various fields? Well, here a few points for you to ponder over:

1. Women are never taken seriously:

It’s a general notion and a tough one to break through. Banks and other organizations never take the new budding women entrepreneurs seriously as they do the male. Blame it on the patriarchal society or the banks’ old-fashioned vision, but it is challenging for a woman to crack through the loan process and get the loan approved single-handedly.

2. Women never take care of credit score:

Women are so tied up with expectations and responsibilities that they end up holding a low credit score and their start-up stands no chance in gaining loans. A credit score has to be maintained and nurtured right from the beginning, but sadly women ignore this aspect.

3. Lack of time:

Most banks ask for a minimum of two years of business records for any loan to be approved, between which if the business fails to show enough cash flow, there are very tiny chances of the loan being approved.

Women don’t consider their business as the main source of income due to which they fail to pay attention to these details; they ignore this critical aspect.

4. Collateral Security:

It becomes easy for any startup business loans if they have some collateral properties to support their loan documents. In case you are a new start-up, keep some property as security for your loan.

Next time you apply for a loan, make sure you pay close attention to the points mentioned above.

What kind of business loans must women look for in their start-up business?

There are various kinds of loans that women can avail for when they plan to start a new business. Below listed are the most famous and reliable ones.

SBA Loans:

SBA loans are the most famous loans that anyone can apply for. Irrespective of male or female, if they plan on starting a new business, you can blindly apply for these which are the most convenient in terms of interest rate and the loan amount.

Small Business Loans are available for any small-scale business looking for immediate cash to kick start the company or is struggling to keep the business running. These loans can be applied with intermediary lenders, who approve the loans to qualifying start-ups on behalf of the Federal Government.

Grants:

Women entrepreneurs can look for various government, or private sector rollout schemes or grants to start their new business. These grants help out the women financially and boost their confidence to start the business. The grants are aimed to socially uplift the scenario in the business world and ensure equal participation of both genders. Also, to promote small-scale businesses within the country and build the economy of the country.

Funding Circle:

It is not an easy task to instantly get SBA Loans; women entrepreneurs can look for online lenders during such scenarios. These lenders offer loans for any business facing the financial crunch and provide a short-term loan for a period of close to 3–18 months for those women who can support documents for working capital.

Funding Circle loans are for those who want a long-term loan period and look for a large amount when compared to the SBA loans. In general, the interest rate could be anything between 4–23 percent on the total amount, and you can apply for a loan amount anywhere between $25,000-$500,000.

OnDeck:

SBA loans make for the best option for women who want to kick start their start-up. But as their backup, they can always look for a Fund circle as their next option and if that doesn’t appeal to you, look for OnDeck loans.

OnDeck offers similar flexible loan options such as SBA or Fund Circle for women. You can apply for a short and a line of credit loan, with an interest rate close to 35%, maximum loan amount being $250,000 and the term period being 18 months the max.

These loans are the best option if you want immediate cash flow to sustain your business.

Conclusion:

Despite all the ups and downs between both genders, it is to be noted that many microloans are tailor-made for budding women entrepreneurs off late. Within the last two years, close to about 1,500 new businesses are kick-started by women, with a yearly graph of close to 4.2% growth in the percentage of women venturing into the business world over the past decade.

Ultimately, women are coming to the forefront and are taking over the business world with a bang. Are you a budding woman entrepreneur who has a great idea but struggling with funds? What are you waiting for? Go through the pointer as mentioned earlier and give a good start for your business.

ALSO READ: How To Get A Unsecured Business Loan With Bad Credit

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Most SBA loans require collateral, but it is possible to get an unsecured loan. The Standard 7(a) loan up to $ 25000 does not require any collateral. The online SBA loan information can help you with this. You need to ensure that your efforts to get a loan are not wasted.

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How To Get A Unsecured Business Loan With Bad Credit

Are you a business owner? There are times when businessmen need funds but are not in a position to put up collateral. It could be because they don’t want to or are unable to. What is the best way out? How to get a loan without any collateral? Have you heard of unsecured loans? The lenders give these loans without any collateral. The lender assesses and analyzes the financial history of the applicant. If he deems it strong enough, then he takes the risk of lending money. Most traditional lenders and banks do not consider small business owners worthy enough and will not offer unsecured loans. There are many alternative small business loans options for people who want to take their business to the next level.

What Is The Difference Between Secured And Unsecured Business Loans?

Before you go any further, as a business owner, you should be familiar with the difference between secured and unsecured business loans. This difference will influence the terms of the loan and affect the risks you as a borrower hold.

The burden of the risk is placed on the borrower in a secured loan. In an unsecured loan, the burden of risk shifts more to the lender.

What is a secured loan?

Secured loans are backed with some form of collateral. Collateral is something that is pledged as security for the repayment of the loan. If you are not able to repay the loan, then you may lose this collateral. Your property or business equipment can be collateral for the loan. The idea behind a secured loan is that any asset put up as collateral should be valuable to the borrower, which ensures that he will try his best to protect his assets. The lenders can physically seize the assets which are used as collateral in the event of non-repayment. Some examples of secured loans are:

Mortgages

Auto loans

Construction loans, etc.

What is an unsecured loan?

A lender issues an unsecured loan without holding any collateral against the loan. For a borrower, an unsecured loan is a less risky option. Banks and other traditional lenders also offer unsecured loans in the form of credit card purchases, personal loans, educational loans, etc. Usually, it is not very easy to get approval for unsecured loans unless a borrower has a strong credit history and a reliable income stream. To find unsecured loans for bad credit scores is extremely difficult but not impossible. The lender has no collateral against the loan and relies more on the agreement. The terms of the loan reflect this risk. The interest rates are much higher, and the repayment schedule may also be more rigid. Some examples of unsecured loans are:

Credit cards

Signature loans

Student loans

How can you get an unsecured loan?

Getting appropriate funding at the right time for your business is crucial for it to grow well. The US Small Business Administration (SBA) gives loans to small businesses. The SBA microloan program is very popular with small business owners.

Most SBA loans require collateral, but it is possible to get an unsecured loan. The Standard 7(a) loan up to $ 25000 does not require any collateral. The online SBA loan information can help you with this.

You need to ensure that your efforts to get a loan are not wasted. Understanding the requirements which are needed to get an unsecured loan will increase the chances of success.

Fully understand the application process. It could be online or offline. Check that you enter all information correctly.

Learn as much as you can about different lenders and their terms. This will help you secure the best-unsecured loan.

Collect all the pre-qualification information to make sure that you can meet all the eligibility standards.

Get your application information along with documentation in order and completely ready.

Once you apply for the unsecured loan, the lender will look at certain things to determine if you qualify or not.

How long you have owned the business

Annual revenue

Personal credit score

Business credit profile, etc.

A lender can give you a loan even with a bad credit score, but a high credit score will boost your chances.

Business loans without personal guarantee

An individual’s personal guarantee is a legal promise to repay all the credit issued to their business. This guarantee states that if their business cannot repay the debts, the individual will be personally held responsible for this. All business loans come with their own risks, be it secured or unsecured loans. Startup business loans with bad credit are even more difficult. Most lenders need to make sure that you will be able to repay the loan and demand collateral. However, if you have high revenues and high business credit scores, then they may offer unsecured loans. Getting unsecured business loans without a personal guarantee is possible, but it may not be as big as a secured loan.

Assessing creditworthiness

Lenders assess creditworthiness by looking at the credit history. All transactions are reported to the credit bureaus, so if you want a good credit score, you need to avoid late payments or defaults. There are specific criteria that lenders often look at

The character of the individual, both subjectively and objectively. This will include your public reputation as well as your business history.

Capacity to generate revenue or cash flow and repay the loan

Capital that you have or have invested in your business.

What is AmPac Tri-State CDC?

AmPac Tri-State CDC is a Certified Development Company (CDC) of the US Small Business Administration (SBA), which provides funds to businesses that seek to buy real estate, equipment, etc. It is the only faith-based CDC in the nation. Its mission is to help the community with resources made available by the SBA. Its vision is to lead SBA in bringing faith and business together. Individuals with the right credentials can get unsecured loans here.

Conclusion

Many lenders only give unsecured loans to borrowers with high credit histories. Small business owners often do not have the proper credit history because of the usual ups and downs in any business. To get an unsecured loan, you need lenders who can look at more than just the credit score. It is possible to get an unsecured loan even with a bad credit history once you fully understand the process.

Also Read: SBA Micro Loan For Women Entrepreneurs

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SBA Micro Loan For Women Entrepreneurs

As a woman small business owner, have you faced difficulty in raising funds? Or maybe you want to start a business, and you need money to do so? The sad reality is that women have a much harder time securing business loans than male business owners. Access to loans, grants, or funding is extremely important for businesses owned by women. However, studies show that only one in four women actually apply for business loans. Moreover, the women who do, ask for almost $ 35000 less than their male counterparts.

Microloans are an affordable way to secure loans for women. They are a smart option, and women can get their businesses up and running with the right funding. There are some unfair differences between the funding for men and women-owned businesses. The government small business loans for women, supported by SBA and some other alternative lenders, have reduced the differences and made it easier for women business owners to obtain funding.

Problems With Funding Businesses Owned By Women

Many reports over the years have shown that the true potential of women entrepreneurs has not been realized fully. In the last few years, there has been a rapid growth in women-owned businesses. Despite this, a big revenue gap exists between all businesses and women-owned businesses. This may reflect the complex financial and societal patterns, but the differences only make the situation worse. If a women-owned business does not generate high revenue, then it becomes difficult to sustain or thrive. Lenders are hesitant to give even small loans. The studies show that:

Men seek out loans for their businesses more than women.

Men are more likely to receive loans and funding

Women rely more on credit cards to fund their businesses

Can Micro Loans Help Close The Gap?

There is no doubt that the funding opportunities for women-owned businesses need to improve. The good news is that even if the traditional lenders are not doing enough, there are several start-up business loans available for women to help them fund their business or start their own business. Microloans are available through non-profit organizations. These are specialized business loans usually disbursed through community-based organizations. The US Small Business Administration (SBA) is one such organization that gives microloans to business owners who cannot raise funds from traditional lenders. Microloans provide start-up funding as well as help in mentoring, educating, and training new business owners. Women need microloans to get their businesses off the ground and make them succeed.

SBA Microloans For Women-Owned Businesses

SBA microloans provide funding opportunities to small business owners who face difficulties while looking for funding. Minority entrepreneurs, low-income individuals, veterans, and women business owners get a good deal with the SBA microloans. Although there are no specific start up business loans for women, the SBA microloans are perfect for them. They get great payment terms and low-interest rates, which are better than most other competitors. Moreover, SBA loans for women can be used for varied purposes. Certain microlenders lay down restrictions about the way the funds can be spent. With an SBA loan, a qualifying entrepreneur may use the funds to purchase inventory, pay employees, buy office supplies, continuing education, and much more.

SBA guarantees loans for small businesses but does not directly pay the loan. It uses intermediaries who issue the loans. As a guarantor, SBA pays a part of the loan if the borrower defaults. This encourages the lenders to work with small business owners. Women can benefit from the SBA microloans. They can get a loan amount of up to $ 50000 to start a new venture or expand their business.

To qualify for a microloan from SBA, women business owners need to find an SBA lender and then meet all the requirements laid out by the lender. The requirements vary from lender to lender, and it is important to compare and see which one is most suitable. The SBA only establishes some parameters in regards to the interest rates and loan uses. The intermediaries are left to decide the terms and, more importantly, who shall receive the microloans.

Repaying the loan

To a borrower, the main question is, ‘how to get a start up business loan?’ To the lenders, what matters most is the ability of the borrower to pay back the loan. It does not matter if it is a woman or a man. The question they ask you is, ‘Can you pay back the loan on time?’ You need to show the lenders your ability to repay, and you can do this by

Showing the existing cash flow of the business

If there is no revenue, show the financial projections

To qualify for SBA microloan, business owners have to submit a business plan. A detailed business plan convinces the lender to put his trust in you and your business and hand you the funds. A business plan must include

Your personal and business background

The value proposition of your business

Analysis of competitors and markets

Marketing strategies

Financial statements or/and financial projections for the next 3 to 5 years

Advantages and disadvantages of SBA microloans

SBA microloans are an affordable source of funding for business owners looking for a small amount and may have failed to get it from other sources. However, they have their pros and cons.

Advantages

Great funding opportunity for women, minorities, veterans, etc.

Start-ups and established businesses are eligible

A good option for people with short credit histories

Low-interest rates

Long repayment terms

Disadvantages

The loan amount cannot be used for real estate purchase or debt refinancing

Unsuitable for entrepreneurs who need more than $ 50000

The process can take up to several weeks

Require detailed business plans

Need collateral and even a co-signer if the borrower has a bad credit history

Conclusion

Though big strides have been made as far as equality between men and women-owned businesses is concerned, it is still tough to raise money for women. The great thing is that even if traditional lenders are not supportive, there are some great options for minority business loans and grants to choose from. Microloans help in leveling the field for women and other disadvantaged business owners. Women entrepreneurs can go on to achieve great things if given support at the right time.

Also read: Why You Should Start Your Small Business Now

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Why You Should Start Your Small Business Now

Have you been waiting for the right time to start your business? Many people think that everything has to be perfect for them to start a business. It is not so. Despite the COVID-19 pandemic and its fallout, it is still a great time to start a business. The ‘new normal’ should not be an obstacle in your business dreams. In fact, you should go out and grab the opportunity coming your way and make a success out of it. 

All businesses are coming back to life, maybe in different ways, but what about start-ups? The founders can be a bit hesitant about how to obtain a small business loan because of the situation, but they can achieve their dream with the right attitude and better planning. 

Choose a low-investment business

Start your business from home 

Buy used equipment and machinery

Hold virtual meetings instead of traveling

If you have a job, hold on to it and start     part-time

Use freelancers instead of hiring employees

Use social media for marketing 

Build cash flow 

This is also called the ‘bootstrap mentality,’ a combination of innovation, agility, and frugality. 

Is getting funding tough? 

Yes and no. Getting a loan or funding depends on a lot of factors. You need first to understand why you need the business loan or funds. What is the purpose? Once you are clear about the purpose, it becomes easy to match it with the available options. For starting a small business, the US Small Business Administration is a good option. They offer microloans to eligible people at very low rates. Apart from SBA, there are many alternative small business loans available for borrowers. 

SBA works with lenders to offer loans to small businesses. It does not directly lend money to business owners but only sets the guidelines for the lenders. SBA guarantees a part of the loan and reduces the risk for lenders. This makes the lenders offer loans to small businesses more easily. 

 What is a Microloan? 

The SBA Microloan program offers loans up to $ 50000 to help small businesses to start up and expand. The average microloan given by SBA is around $ 13000. SBA provides funds to the chosen lenders who act as intermediaries. They further offer microloans to eligible borrowers. SBA offers preference to underserved sections and gives women & minority business loans to start a business. 

Eligibility criteria

The intermediary lenders have their lending and credit requirements. Most of them will ask for some type of collateral or personal guarantee from the owner. Small amounts of loans can be given without any collateral. The SBA only gives the parameters, and the actual terms will vary from lender to lender. The best part about these microloans is that SBA prefers to provide small business loans for minorities, women business owners, and low-income business owners.

Finding the right lender

SBA loans for small businesses are available to business owners through non-profit, community-based entities. These lenders have experience in lending as well as in technical & management-related issues. Depending on your requirements, you need to check what each lender offers. Each lender may offer different terms for the loan. 

You need first to find an authorized lender near you. You can contact the local SBA office or check online SBA loan terms and lenders' information. The lenders will make all the decisions and set terms for you, so choose carefully. 

Benefits of SBA-guaranteed loans 

Competitive Terms: SBA offers highly competitive rates and fees for various loans.

Counseling assistance: Some SBA loans come with a lot of support to help you with starting and running your business. 

Unique benefits: flexible overhead requirements, lesser down payments, and no collateral for some loans are some of the unique features. 

How does it work? 

The process for a loan from SBA consists of the following steps:

First, you need to describe your needs to the     lenders. Answer a few basic questions about your business.

The lenders who find your information of some     interest will send you an email with contact information.

Now, you can talk to the interested lenders and     compare their fees, terms, rates, etc. 

Once you find your match, you can apply for a     loan and do the paperwork. You will soon have your business loan. 

Prepare well 

Even before you start looking for a lender, you should do your homework well. You should be ready with some crucial information that most lenders ask for. 

Business plan: most lenders will ask for a detailed business     plan when you apply for a loan. A good business plan is also essential for     you to execute it well.

Use of funds: you should know how much capital you require and     how you plan to use the funds. 

Credit history: lenders look at the credit score to calculate     interest rates and credit risk.

Bad lenders

In your search for business loans for minorities, women, or for a specific purpose, you may come across some fraudsters or predatory lenders. If you are not careful, these lenders may impose unfair terms on the loan you take from them. It would be best if you protect yourself from such lenders by looking for the warning signs.

Significantly higher interest rates than the     competitors’

Higher fees at more than 5 % of the loan value

He asks you to lie on the paperwork

Ensure that the lender gives you all the details about the annual percentage and full schedule for payment. Research competing offers to take the right decision instead of getting pressured into taking a bad loan. 

Conclusion

Smart business owners understand that success is possible even during these challenging times. The ability to adapt and innovate according to changing consumer needs can make any business successful. In fact, small businesses can do much better than bigger businesses because of their ability to move fast. Innovation is the way to solve problems at the root level, and consumers are more open to new and innovative ideas. Small business owners who want to take a minority small business loan or any other specific loan should first assess their business idea carefully to ensure its success. Now is an excellent time to start a small business and achieve your goals.

ALSO READ: How To Get A Equipment Loan For Your Startup Business?