Get a Business Loan with Subprime Credit
If your personal credit history is holding you back from getting financed by traditional institutions, we’re here to be the bearers of good news—it doesn’t have to. Luckily, there exists a wide range of bad credit business loans you can take advantage of today. Subprime business loans are a great alternative for those who were previously not eligible for traditional business loans do to credit or cash flow issues. No doubt it’s easier if scores are great, but there are options to get bad credit business loans.
Acquiring a working capital loan, no matter what level your personal FICO, is possible at AdvancePoint Capital. You can enjoy the benefits of alternative lenders and poor credit business loan options at competitive interest rates.
Banks and credit unions do not typically provide bad credit business loans for small business owners because they have to protect their depositors when offering small business loans. So bank loans are out of the question if you're looking for working capital loans with bad credit. That’s where AdvancePoint Capital comes into play to rescue small businesses.
Running a business has a lot of moving parts. You may need cash for a variety of reasons including working capital, equipment purchases, renovations, expansions, or basic cash flow shortages — the list goes on. If one of those key elements is missing from your business, the structure can quickly fall apart. Having the opportunity to access a loan with bad credit for your business while struggling may be the very thing you need to catapult your company into the next income bracket. So, let’s dive into subprime loans for bad credit so that you can be better prepared for your small business loan application.
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What is a Subprime Business Loan?
A subprime business loan is defined as a non-conventional loan that considers businesses with sub-prime (below average) credit or cash flow weakness that are not acceptable to traditional business loans. “Subprime” has a stigma attached to it due to the business borrower’s low credit score and its impact on business loan product availability and terms, like higher interest rates. The costs and terms of bad credit business loans are not as favorable as a traditional business loan for bad credit borrowers.
Used properly, subprime loans play a vital role in providing businesses access to capital. Even business owners with poor credit scores need working capital. Without subprime loans, there would be no other options for this segment of business owners. Blocking all subprime borrowers from access to capital would diminish the diversity and overall existence of small businesses in general. It would also disrupt the balance of access to self-employment.
What is Subprime Credit?
Subprime credit means your personal credit history is fair to the poor or more directly, bad credit. The term subprime is derived from “prime,” which means thriving, or best. “Sub” means below the normal standard. Personal credit is not just a FICO score but an overall description of credit.
What is a Bad Credit Score?
- Excellent 780-850 Best products, with best rates & terms
- Very Good 740-779 Best products with great rates & terms
- Above Average 720-739 Best products with slight adjustments to rates & terms
- Average 680-719 Most products with adjustments to rates and terms
- Below Average 620-679 Less products with more significant adjustments to rates and terms
- Bad Credit 580-619 Subprime Business Financing
- Very Bad Credit 520-579 Subprime Business Financing
- Extremely Bad Credit Below 520 Subprime Business Financing
Role of Business Credit in Subprime Loans
Business credit has an impact on business financing, that goes without saying. The good news is you can get business funding. If you have a defaulted business loan that is in collections or that you are currently in default on then that may block your ability to get a business loan.
What are the Most Common Uses for a
Subprime Business Loan?
Here’s a list of the top reasons that people need access to capital from Subprime loans.
- Working Capital loan- Advantageous for protecting cash flow due to operating expenses, purchases, repairs and other operating needs.
- Inventory and/or Supplies - Inventory and supplies needs to be maintained to support customer demand.
- Marketing/Advertising - Advertising and marketing is needed to expand and retain customer base
- Equipment Purchases - For some businesses, equipment is the heartbeat of the business and needs to be acquired and maintained.
- Expansion - Projects to expand a business can be costly and requires in many cases financing.
- Renovations - Renovating a business is a large investment into the future of the business to remain competitive and acquire more customers.
- Emergencies - A business has many moving parts and sometimes thing come up that require capital to solve.
6 Best Subprime Business Loans (September 2023)
Subprime Business Line of Credit
A business line of credit is a revolving credit line that allows business owners to draw funds off of it like a credit card up to a credit limit. Great for working capital funds that are needed on the fly without having to contact a lender to access funds once in place.
- Flexibility with a revolving line
- Save on interest with early pay
- Approval in a day
- Drawn money and pay down on demand
Short-Term Subprime Business Loans
A Short term business loan with bad credit where designed for the purpose of providing business funding for the credit impaired while reducing the risk of the bad credit for the lender by shortening the time to repay. Offers fixed rates, fixed terms, and fixed set payments.
- High approval Rates
- Fixed Rate, Term and Payment
- Application process is Easy & Quick
- All credit considered
Subprime Merchant Cash Advances
A merchant cash advance, also known as a purchase of future sales agreement, provides business owners with bad credit who can't get traditional small business loans with bad credit alternative funding solutions. Merchant cash advances are repaid by taking a fixed percentage of future credit card sales as repayment. Repayment is flexible and attached to the future sales performance of the business, creating a lesser burden on repayment. A great working capital solution.
- Fast & Easy Application process
- Flexible payment with split of future sales
- No personal collateral required
- Bad credit is ok
Subprime Business Cash Advance
Similar to merchant cash advances, a business cash advance is also a purchase of a future sales agreement but repayment is made by the funder taking a set percentage of all future sales deposits until paid back in full. Daily or weekly payments are required for this product. A great option for those businesses that can't get approved by traditional business loans and may not accept credit cards from customers as a business model. Offers same-day funding.
- Application process requires only bank statements
- Convenience ACH payment
- Payments are a percentage of sales
- Funding in as little as 1 day
Invoice factoring, also known as accounts receivable factoring or Invoice financing, is for businesses who invoice their clients on a regular basis with net 30 to net 60 terms and would like to get an advance on the invoice before the invoice is paid by the client. The credit of the business owner invoicing, therefore, is not relevant for invoice factoring.
- Low fees starting at 1% per invoice
- A purchase of an invoice instead of a loan
- Invoice factoring handles accounts receivable
- Accelerates Cash Flow
Generally, Equipment financing requires good credit, but new products have come out recently for certain types of equipment that allow for subprime credit.
- Use collateral of Equipment for financing
- Terms 2 to 5 years
- Monthly payments available
- Affordable payments
Where do I Find Subprime Loans for Bad Credit?
Acquiring subprime business loan can take some documentations that subprime lenders might ask before providing you with the funding. You can find subprime business loans from any of the following subprime lenders:
- Online Lenders - Over the last 10 years there has been tremendous growth in online business lenders with unique products, terms to solve many business funding needs.
- Business Loan Brokers - A business loan broker has access to a network of lenders and products to service subprime customers.
- Marketplace Business Lenders - Marketplace business lenders connect lenders with customers to offer subprime customers credit.
Frequently Asked Questions (FAQs)
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Advice, Tips, and Warnings about Subprime Loans
If you’re considering a subprime business loan, you first must ask why. So, are you looking at these business loans because you were declined based on your personal credit history? Have you evaluated the cost vs. benefit analysis?
If the answer is yes to any of the above questions, we would recommend looking into asset-based business loans. If the answer is no, take the time to look at better business finance opportunities that offer better rates, costs, and terms.
Subprime Borrowers and Subprime Lenders: Predatory Lending
There are many important topics related to bad credit business loans, but predatory lenders are one of the most important to discuss. Not all subprime loans and lenders are equal. Unfortunately, some subprime lending institutions are founded on bad intentions.
Subprime borrowers tend to be preyed upon because of their bad credit ratings and high risk of default by online lenders. Worst of all, subprime loans usually have very high-interest rates, which jack up the monthly payment. Borrowers might get a subprime loan from an unsavory lender to pay an installment loan they’re already struggling to pay. Installment loans tend to be car loans, student loans, mortgages, and more. They usually have a lower interest rate.
There is no set interest rate for a subprime loan. This applies to subprime mortgages and auto loans, not just business loans. Each lender gets to choose the interest rate themselves, which is why you need to be extremely careful when you shop around for a subprime loan with online lenders. Predatory subprime loans with high interest and unmanageable interest payments lock borrowers into debt. In short, this type of loan is, at best, unfair and, at worst, abusive on the part of the lenders.
Subprime Loan Risks
Although poor financial histories and credit scores usually lead borrowers to unfair subprime loans, this type of loan digs borrowers further and further into debt. If you end up with a loan like this, you’ll find that your monthly payment becomes outrageous. You’ll watch the balance in your bank account drop while your mortgage, auto loan, and any other type of loan you have, pile up.
Lenders may not always have your well-being in mind. Remember, offers that appear too good to be true probably are. At AdvancePoint Capital, we promise to be completely transparent and honest. It is our mission to help our customers achieve financial balance. We want the best for you, not the worst.
Signs of Predatory Lending to Look Out For
Two characteristics can identify a predatory subprime lender:
- Lenders who create loan terms that can’t be met within reason
- Lenders who seek borrowers who obviously can’t meet these unreasonable terms
Additional signs of predatory practices include:
- Basic loan costs aren’t made clear to borrowers
- Lenders have a lot of complaints and negative reviews
- Lenders require electronic payment (this is actually illegal)
- Lenders do not check credit scores before issuing borrowers a loan
- Lenders offer an unreasonably high-interest rate.
If lenders or banks exhibit these signs when you are looking for a loan, head for the door. These characteristics don’t just apply to subprime business loans but also subprime mortgages, auto loans, or any other type of loan you may need. Banks, money lenders, and mortgage lenders engage in these practices for malicious and self-serving reasons.
What to Look For in Subprime Lenders?
People often wonder what they should be looking for in subprime lenders. Although the signs of bad lenders and banks are pretty clear, how can you be sure?
- Talk to at least three different lenders and compare their terms and fees.
- Pay attention to the repayment terms. If this period and its fees seem too high, you may end up locked into the loan forever.
- Reputable lenders don’t require upfront fees.
- Lenders should never pressure you into borrowing more than you’re comfortable with, signing incomplete contracts, or overstating your income.
Whether you need a subprime mortgage, auto loan, small business loan, or some other loan, you have to shop around for the best-rate loans. Avoiding predatory lenders will allow good people like you to live a financially stable life.
How to Apply for a Subprime Business Loan?
Applying for a subprime business loan is a simple 6-step process.
Step 1: Interview- It starts with an initial brief interview with a business finance specialist to discover your businesses needs and qualifications.
Step 2: Application- Fill out the short application with pertinent business and personal information along with requested documents.
Step 3: Receive Offers- Offers detail product, rate, fees, terms and conditions to consider (Offers are typically provided within 3 to 6 business hours)
Step 4: Compare and Contrast Offers- Determine if the offers are a good fit for your needs and that the terms are agreeable and affordable.
Step 5: Accept Offer- Accept offer and supply closing stipulations to fund
Step 6: Fund - Once all stipulations are cleared by underwriting, funds are sent to your business bank account by wire or ACH.
AdvancePoint Capital offers an easy business loan experience and countless resources to set you up for success. Our borrowers love the streamlined process, high approval rates, and flexible monthly payments that we offer. Unlike other banks and lenders, we offer the best deal in town.
If you need a subprime business loan with a low-interest rate to achieve the financial balance that your business needs to thrive, call our excellent customer service team or fill out the online form to get your free quote today.