According to the Bureau of Labor and Statistics, one out of five businesses are going to fail within the first year in business and within five years nearly half of those will close their doors and in 15 years 75% of businesses will close down for good. Most businesses do fail making the business lending space very risky but there are certain short term loans that can help businesses succeed.
Business Credit Cards
Most banks offer unsecured business credit cards and most of them report to consumer credit reporting agencies. They all require a personal guarantee from you and you can get approved usually for one card max as they stop approving you when you have two or more inquiries on the credit report. Typically, when you apply for a credit card you put an inquiry on your consumer report and when other lenders see these they won’t approve you for much more credit because they don’t know how much other credit that you’ve recently obtained. so they’ll only approve you if you have less than two inquiries on your credit report within the last six months and more will get you declined. Read more!
Most consumer credit starts with secured credit cards or an account that has a well established cosigner. But co-signed accounts and secured accounts really aren’t popular or widely used in the business world. Most business credit starts with vendor accounts instead. Vendor accounts are accounts that typically offer terms such as Net 30 instead of revolving. So if you get approved for a $1,000 of vendor credit and use all $1,000 of it you need to pay that about back in a set time such as within 30 days on a Net 30 account. A Net 30 account would need to be paid in full within 30 days. In contrast, Net 60 account would need to be paid off in full within 60 days. Unlike with revolving accounts, you have a set time you must pay back what you borrow or the credit card you used.
Store Business Credit
Once you have five payment experiences reported, you can then secure store credit cards. These are cards offered by most retail stores such as Office Depot, Staples, Lowes, Home Depot, Walmart, BP, Chevron, Sam’s Club, Costco, Best Buy, Amazon, and much more. These types of business credits store cards usually have limits of 10 to 100 times that of consumer credit. They function the same as consumer cards but they don’t report to the consumer reporting agencies. They report to the business credit bureaus, helping you further establish business credit. You can get approved with no personal guarantee in most cases. With the initial business credit established, you can get approved leaving your social security number off of the application. This means you won’t be supplying a personal credit check for approval. Once you have 10 payment experiences reported, then you can start getting cash business credit cards. These are cards with Visa, MasterCard, and American Express that you can use anywhere not just in specific stores.
Cash advances also known as merchant advances, revenue lending, and cash flow financing are a great way to get short term loans. You can get approved if you have been in business for one year or more even if your FICO is as low as 500. This is about the only type of unsecured financing that doesn’t require your personal or business credit for approval. Lenders will look at your most recent six months of bank statements to determine your approval. You should have revenue of 120 thousand dollars or more annually and have 10 or more deposits monthly. You should manage your bank account responsibly having a balance left over each month and a few very few NSF charges. If you meet this criteria, you can usually be approved and get money in about 72 hours. Terms are usually about 3 to 6 months initially. You can then refinance when half your loan is paid down and get 6 to 18 months. The rates are high, really high, as this is the highest risk lending you’ll find and also the easiest to qualify for. Usually, you’ll pay 15 to 45 percent and money is paid daily. For more details, visit: https://www.entrepreneur.com/article/338069