 TITLE: How to Get a Small Business Loan With Bad Credit CONTENT: Types of Small Business Loans for Bad Credit\n--------------------------------------------\nIt's difficult to get a traditional business loan from a bank if you have poor credit. Fortunately, there are many other sources of financing you may be able to use.\n*   **Business credit cards**: Using a business credit card not only gives you access to capital, but can also help improve your business credit score if you make your payments on time. As a result, a business credit card can be a good financing option for a startup business that needs to build a credit history. (Make sure to choose a business credit card that reports your payments to the major credit reporting agencies; not all of them do. You may have to contact the card issuer to get this information.) Since business credit cards have higher interest rates than many other types of financing, they're best for financing small amounts that you know you can pay off in full quickly.\n*   **Short-term loans**: Both traditional and alternative lenders offer short-term loans, which generally have terms from six to 24 months. Instead of a fixed monthly payment, some lenders automatically withdraw payments from your business's bank balance daily, weekly or monthly.\n*   **Short-term lines of credit**: These offer terms similar to short-term loans, except they are revolving credit (like credit cards) rather than installment loans (which require fixed monthly payments). Business owners often turn to short-term loans or short-term lines of credit when they need working capital to pay for expenses such as payroll or inventory.\n*   **Invoice factoring**: Small businesses that have unpaid receivables can turn them into cash using factoring. Factoring companies buy your unpaid invoices from you for a percentage of their value (typically about 80% to 85%). The factor collects payment on the invoices from your customers and pays you the balance of the invoice minus the factoring fees. The value of your invoices, not your credit score, is the primary consideration for factors.\n*   **Invoice financing**: Although similar to invoice factoring, this short-term financing method has some key differences. Instead of buying your invoices, the financing company advances you the value of the invoices. You're responsible for collecting payment from your customers and paying back the loan and any related fees.\n*   **Equipment financing**: Do you need to buy equipment for your business? This type of loan is used to finance the purchase of equipment using the equipment itself as collateral (kind of like a car does for a car loan). This helps to keep interest rates relatively low, although those with bad credit will pay more interest. Equipment manufacturers are the best place to look for equipment loans; there are also third-party equipment lenders, including Currency Capital, CIT and Balboa Capital.\n*   **Microloans**: If you only need a small amount of money (anywhere from $500 to $10,000), a microloan from a nonprofit organization could be the answer. These loans are primarily intended for business owners who live in underprivileged communities or run socially responsible businesses. Your business's goals must also align with those of the nonprofit, such as creating new jobs for people in poverty. Poor credit isn't a deal breaker for microloans; however, the lender may require you to get regular business counseling or take business classes as a condition of approving obtain the loan. You can check out popular microlenders such as Kiva and Accion to find out more about microloans.\n*   **Merchant cash advance**: Businesses that accept a high volume of credit card payments (such as retailers or restaurants) may qualify for these short-term loans for people with bad credit. The lender advances you a lump sum against your business's future credit card sales and then collects a percentage of those sales from you every day. Since payments are based on sales, you won't have to make a big payment on a day with slow sales. However, merchant cash advances have high interest rates and high fees, so most businesses should use them as a last resort. END