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MicroLoans for small business owners and start-ups with bad credit

Microloans service entrepreneurs who need financing assistance to start or expand their business but cannot qualify for traditional bank loans due to past credit issues. Microloan organizations provide funding to start-up entrepreneurs, home-based businesses, existing and growing small business owners.

Small business owners seeking bad credit business loans may find a microloan meets their needs because you may qualify with less-than-perfect credit, little to no assets and even limited business experience.

Business owners with bad credit or no credit history may qualify for a loan that allows you to get a small, short-term loan from a microlender which will help you establish and build credit.

Microloans

Who can apply for a Microloan

Microloans are made to women, low-income, veteran, and minority entrepreneurs and others with the capacity to own and operate a small business. That means the Mircroloan program may be the answer to your short term financing needs for Start-Ups, Newly Established, Home-Based and Growing Businesses.

Amount you can borrow for a Microloan

Small business owners can borrow up to $50,000 under SBA's Microloan Program but the average amount borrowed is around $13,000. You can borrow as little as $500. The borrower may use the proceeds for working capital and acquisition of materials, inventory, supplies, furniture, fixtures, machinery and equipment. Microloans may not be used for real estate. Microloans are not a one-time deal. Most Microloan Programs allow you to come back and borrow larger amounts once the first loan amount is paid on time.

Who provides Microloans

Hundreds of microloan programs exist throughout the United States. Nonprofit agencies, private foundations and the Small Business Administration (SBA) operate Microloan Programs.

The SBA gives intermediaries the authority to issue Microloans. These loans have certain conditions between the SBA and intermediaries, and certain conditions between intermediaries and borrowers.

Microlenders are typically small community-based nonprofits. The SBA uses Microlenders around the country as intermediaries to provide SBA loans to small businesses. Under the Microloan Program, SBA makes direct loans to Intermediaries that, in turn, use the proceeds to make small loans to eligible borrowers. Find an authorized Microlender near you.

General lending guidelines are established by the intermediary agency and all credit decisions are made on the local level. Business owners will likely be required to submit a business plan. If you don't have a business plan most intermediaries offer business planning courses and other training. There's also templates that can assist you in preparing a business plan at SBA-Write Your Business Plan.

Microloan Terms, Interest Rates, and Fees

The maximum term allowed for a microloan is six years. However, loan terms vary according to the size of the loan, the planned use of funds, the requirements of the intermediary lender, and the needs of the small business borrower. Interest rate on microloans can be lower than traditional small business financing and often much lower than bank credit card rates.

Can I get a Microloan with Bad Credit

The community based intermediary establishes its own lending and credit requirements. It's unlikely collateral will be required for the SBA Microloan. But the business owner will be required to personally guarantee repayment of the loan. A credit report is pulled on the small business owner but it's not the only criteria considered.

Bad credit business owners are often approved with a solid business plan and business training. Although it is completely up to the Microloan organization to establish underwriting criteria, they are accustomed to dealing with start-up businesses who have little collateral and less than perfect credit.

Training and assistance

The intermediary is required to provide small business training and technical assistance to the borrower if needed. Small business owners may be required to complete a series of training or a business planning course as a precondition before the loan application is approved.

Where to apply for a Micro-Business Loan

Small business owners should apply for a microloan in their community, city or county. Visit the SBA to find a list of microlender intermediaries around the country. While microloans are a good source of funds for small businesses unable to borrow from traditional banks, it can be cumbersome to obtain a microloan if training and business planning courses are required.

Another problem with microloans is that intermediaries distribute the loans in their own communities and if you don't live in an area of an intermediary then a microloan may be unavailable to you. If this is the case you can research your State and local government agencies for alternative sources as some offer loans similar to the microloan program.

Alternative Bad Credit Business Loans

Accion USA

A great alternative to the SBA Microloan Intermediaries is a nationwide microlender called Accion USA. Accion USA specializes in working with small business owners who may not meet traditional bank loan qualifications. Accion USA can actually help you build a positive credit history as they report loan payments to the major credit bureaus. Startup and existing small businesses as well as companies that are established in economic empowerment zones can qualify for loans that range from $500 to $50,000 with terms from two to 72 months. Accion offers fast turnaround and flexible requirements.

Kabbage Small Business Line of Credit

If your credit scores are imperfect, Kabbage may be a good option for small business owners who need access to cash quickly. The lending process occurs online and is data driven. Information is gathered including bank account data, payment processing data, social data, shipping data, credit card transaction data, and accounting information to make a decision. It takes about 10 minutes, with no human intervention.

Here is the low down on how to apply for a  Kabbage business line of credit and what is required:

  • What you need to qualify. Your business has to be at least one year old and have a minimum of $50,000 in annual revenue, or $4,200 per month over the last three months.
  • Apply online. Create an online account by providing your email and creating a password. Tell Kabbage the name of your business and the type of industry it is.
  • Applying won’t hurt your credit. Kabbage will only perform a hard credit inquiry when you accept the credit line offered. Submitting an application will have no effect on your credit score.
  • Link your business information. Link your business’s checking account, along with any other accounts including PayPal, QuickBooks or Amazon. The more business accounts you provide to Kabbage, the better your chances at getting the loan you need.
  • Kabbage card. If approved, you will get a Kabbage Card to access your line of credit.
  • Dashboard. Use the Kabbage dashboard to draw funds deposited directly to your checking or PayPal account. You can take out money as often as every 24 hours.

Find out if you qualify for a Kabbage business line of credit.

2 thoughts on “MicroLoans for small business owners and start-ups with bad credit”

  1. I am a small janitorial women minority business owner in the Virginia area my personal credit score is very low but my business credit is not tarnished , I got sick in 2012 and it just seems like no one wants to give me a second chance I have been trying to get financial help to for a while .Can you help me ? How much will I need to pay to get financial help?

    1. If you are looking for credit repair, creditmashup.com does not perform credit repair. The website is designed to offer do-it-yourself rebuilding credit strategies. A good place to start is here.

      You might want to try Accion.org if you are looking for a small business loan. They help small business owners that have problem credit.

      If you are looking for a small business credit card for bad credit or poor credit the Applied Bank® Visa® Business Credit Card may be the answer for you. With on-time payments and keeping your credit card balance low, you can begin to improve your overall credit score, making it easier to re-establish your good credit.

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