Alternatives to High-Risk Business Loans
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High-Risk Business Loans
High-risk business loans are typically small business loans that are offered to businesses with poor or little credit. Because business lenders will determine the risk of the loan on the business’s credit history, borrowers that are deemed “high-risk” generally receive smaller loan amounts at greater interest rates — if approved for anything at all. Many traditional lenders, such as banks, won’t lend to businesses with little or poor credit. That’s why a number of alternative lenders have been formed to fill serve this niche. If you’re a business owner who needs financing but has poor or little credit, you’ll need to learn what your best options for obtaining credit are.
Funding Options for Businesses with Less-Than-Perfect Credit
See if any of these options sound like they could be a fit for your business.
Secure the Loan with Collateral: One of the more popular ways to obtain funding with less-than-perfect credit is to secure the loan with collateral. Businesses can offer inventory, equipment, auto titles and other forms of property as collateral, which they risk losing if they default on the loan.
Peer-to-Peer Lending: The digital age has made it easier than ever for businesses to receive funding, and this has become one of the more popular options. Certain websites provide peer-to-peer lending, where a business owner can post the type of loan they are looking for and a “peer” lender (an individual person) can serve as an investor for the companies they like.
Get a Co-Signer: Banks and traditional lenders may still approve your business for funding if you have a person with good credit to guarantee your loan. If a friend or family member really believes in you and your business, they can co-sign the loan and take on the risk.
Credit Unions: While credit unions do carry some of the characteristics of traditional lending, they can still be a good option for businesses with less-than-perfect credit. Because many credit unions serve industry-specific businesses, you may have an increased chance of approval through one if it serves your industry.
Alternative Lenders: Online lenders like Headway Capital will often use non-traditional methods of reviewing applicants to determine a business owner’s creditworthiness. This means that even if your credit score is less-than-perfect, you still can be considered — and in some cases approved — for a loan.