The lifeblood of any business is capital. Many businesses fail because of under capitalization. In this era of tight credit a viable business with solid revenues and great potential may not be able to reach that critical mass to take it over the hump. Business owners struggle with this reality every day.
Anyone that been in trenches of running a small business knows full well that sometimes your credit can get compromised because of tough circumstances and tough choices that have to be made to survive those circumstances. The fact that someone is not always able to maintain a perfect FICO score is not an indictment on their abilities as a business owner or the value of their business. Unfortunately, traditional banks don’t view things this way. There size and structure don’t allow it. When you’re dealing with the massive bureaucracy of a corporate bank there is no room for nuance or judgement. Decisions are not made by individuals who can weigh a multitude of factors. Decisions are made using algorithms. Even local banks have shifted more towards this model of funding if you have not established a long and steady relationship with them. Fortunately, nature abhors a vacuum and alternative sources of business funding for businesses with bad credit have arisen to fill this enormous need that business owners across the country face.
You have a thriving business, revenue is right around the bend; but you need the funding now. This is a common scenario for many growing businesses and there is a solution. By leveraging your future credit card sales or business receipts for immediate working capital you can acquire an infusion of cash that can be used for your business needs. There is really a night and day difference in degree of difficulty when it comes to acquiring this type of funding as opposed to a traditional bank loan. While a traditional bank loans requires tons of documentation, impeccable credit, and an exorbitant amount of time to underwrite and fund; revenue based funding has no where near the same challenges when it comes to approval. Approval is based on the revenue of the business, and once that is verified the funding can happen almost immediately. This also applies to businesses with bad credit because, as stated before, funding approvals are given based on the ability of the business itself to pay back the advanced funds. In measuring this ability to pay back the funds, a businesses revenue is the primary consideration as opposed to the business owner’s credit. This can be the perfect way for a business to obtain fast funding if they already have steady provable revenue.
The cost of borrowing is much higher with alternative revenue based funding as opposed to traditional bank funding and this cost must be taken into consideration by any business looking to obtain this type of funding. It is important to have a plan in place on how to use the money so that you know the returns will more than outstrip the cost of borrowing. Considering that these funds are often unsecured and available on a moments notice, it is no surprise that the cost would be higher than a traditional bank or SBA loan. However, once you have completed a successful first round of funding (sometimes even before) terms and rates become much better when you request additional advances. All things considered, this is a great alternative for medium to small size business looking for quick funding solutions. This applies to businesses with both good credit and bad credit who need to get funding without a lot of hassle involved. It is just important to weigh all the factors, which are different for every individual business, when deciding on pursuing this type of funding. It’s just good to know that it’s there when you need it.