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How to Get a Loan as a Struggling Business

Published May 24th, 2022 by Cornerstone Capital Advisors

When you're a struggling business, you know how hard it is to stay afloat. From your payroll to capital expenses, you need financial stability to keep your business open and successful. Fortunately, it is possible to get financial assistance to get back on track.

With the right loan, you can regain your financial footing to invest in new equipment or employees. Keep reading to learn how you can get a loan as a struggling business!

Check Out Invoice Financing

If you don't have a stellar credit score and feel like you're struggling, invoice financing is solid option. As a business owner, you may have lots of unpaid invoices that leave you low on cash. Going with invoice financing means that you'll sell your accounts receivable to a third party.

Why should you consider doing this? When you're not getting fast payments from wholesale customers, this limits your ability to reinvest in your organization. You just don't have the money available. 

The benefit of invoice financing is that you'll gain immediate money from the sale that can improve your cash flow. The downside is that your customers may be aware that a lender is accepting payments. Knowing this may make them question your stability as a business. 

Try Business Credit Cards

You don't need great credit to obtain a business credit card. These are not technically loans, but they do help build better capital. When you need to free up cash flow, business credit cards are a good solution for a struggling business. 

You'll get higher credit limits than you would for a personal credit card. And you can work with the credit card company to determine repayment options that suit your financial needs. Just be aware that you may encounter higher interest rates if you need to make a late or partial payment.

A Struggling Business Could Use SBA Loans

Look into small business administration (SBA) loans. These are loans with government backing that are offered through partnerships with lenders. Some SBA loans are specific to disaster loan assistance, while others can help with real estate and equipment.

There are microloans within the SBA program, too. As the name implies, these tend to be smaller loans covering shorter periods of time. The 7(a) loan program remains the most popular SBA program with for-profit businesses, and it offers capped interest rates.

The low-interest rates and good repayment plans make SBA loans appealing. You'll need to demonstrate that you've looked into other options to help improve your financial picture. And you'll need to fit the requirements to be defined as a small business.

SBA loans do come with a lot of red tape, however — and it may take longer for you to gain approval. That's why it's helpful to have an experienced financial advisor helping you with the application process.

Investigate Short-Term Loans for a Small Business

When it comes to small business loans, short-terms loans may be a good option if you lack a strong credit score. The requirements to apply tend to be lenient compared with those of some loans. As an added benefit, these loans usually don't involve a long approval process. 

Many short-term loans have a repayment cap of a few years. If you have good credit, the low cost makes them an appealing way to gain money for equipment purchases and other imminent needs. 

What if you don't have good credit? As long as you have respectable cash flow, a lender may still approve your application for a short-term loan. 

Look into Crowdlending

Another option to gain the money you need is through hard peer-to-peer (P2P) lending, often called crowdlending. With this approach, you'll solicit money from investors. This typically happens through an online lending platform.

With this approach, you'll still need to go through a formal application process. The lending platform will give you a risk level based on your credit score and other financial factors. 

You can use narrative to your advantage and explain how the money will be helpful. This is especially useful if you have poor credit and anticipate looking risky as an investment. The investors will see your details, and they can choose whether to offer you a loan. 

Once you accept a loan and its terms, you can get the money quickly. Crowdlending is a less conventional route that can benefit both the investor and struggling business owner. 

Avoid Being a High-Risk Loan Candidate

There are some measures you can take to ensure that you're not a high-risk loan applicant. You want to make it as easy as possible for a lender to give you money. And you want the terms of the loan to be fair and manageable.

For starters, maintain a strong credit score — and check it if you haven't. If your score is under 700, you'll want to make sure that your personal finances minimize debt and show that you're on top of bill payments. Then you'll stand a better chance of being approved. 

Have a clear business plan you can show a lender, and check your cash flow situation. You want lenders to see that you have money to pay back the loan.

Find the Right Small Business Loans

Running a struggling business requires perseverance and attention to detail. If you work on improving a faulty credit score and securing the right type of business loans, you can reroute your business. You'll need a solid business plan — and the right guidance.

When you need help finding the best types of business loans, contact us.


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