The Importance Of Credit With Alternative Business Funding
If you’ve applied for a small business loan, you’ve already noticed that good credit comes into play. After all, big banks use credit scores to determine whether or not you’re trustworthy enough to actually lend out money to. Most of the time, with mainstream banks, credit is a “make it or break it” factor. This much is common knowledge. What many people do in order to avoid the issue of getting rejected for a loan due to bad credit is go to alternative lending sources.
What they don’t realize is that credit can matter with alternative lenders just as much as it can with major banks. However, the way it can change your situation might vary depending on what kind of alternative business funding you’re pursuing. Here’s what usually can happen for each form of alternative business funding method.
Most of the time, crowdsourcing will not even consider credit scores at all. So, while it’s a perk to have good credit, your chances at crowdsourcing success will not usually improve just by having a good number.
Shockingly, P2P lending sites can have just as stringent requirements as banks! A higher credit score will lead to lower interest rates, more lending sites being willing to work with you, and more individual lenders actually choosing to support your endeavor. Credit scores are very important here, and since the minimum credit score for a loan will change, it's often more unpredictable than banks
Much like with mainstream bankers, credit scores matter with alternative bankers quite a bit. Also like mainstream banks, alternative lending companies also may consider bad credit score to be too risky to work with. If you’re looking for a traditional loan from a smaller group, then you will likely need good credit to get approved. However, there are some groups which will consider bad credit borrowers as long as other aspects of the deal look great.
Merchant Cash Advances
Credit will typically not factor into a merchant cash advance deal, but in some cases, you may actually get better rates if you have good credit. This route almost always totally skirts the need to have a certain minimum credit for a loan.
The bottom line is that credit will affect you, even if you are going the alternative route. If you want to get business funding with bad credit, you may need to work with a method of funding acquisition that won't focus on credit. However, good credit can lead to better deals. How you handle your quest for business funding is all up to you.