When you’re trying to start up a small tech company, getting a loan can be hard. You might not have any credit to build off of and, no matter how small, tech companies are expensive to get going. Luckily, there are options for getting the funding you need.
If you’re trying to get a business off the ground, you need a lender that won’t be too worried about a low credit score. Read on to learn how other small tech companies do it and how you can jumpstart your business today.
Term loans are what usually come to mind when you think about a loan. They are a specific amount of money that you borrow and then pay back over a fixed period of time. They come with interest rates that may be fixed or variable.
Many term loans require credit checks, but there are some that don’t. Some fixed-rate business loans won’t require a credit check, so even if you’ve had a history of bankruptcy, there are still options. The catch with these is you may need to hold a credit card with the lender already in order to qualify for these loans.
Short-term loans have a shorter payback period than traditional loans do, and they don’t come with traditional interest. With most loans, you pay a certain percentage of your loan each time you make a payment on them. But short-term loans use something called a factor rate instead.
A factor rate is based on the total amount of your short-term loan; you multiply the factor rate by the amount you’re borrowing. So let’s say you borrow $5,000 to start up your tech company from home, and your lender agrees to a factor rate of 1.2. You’ll pay $6,000 total on the loan, with $1,000 being the fee you pay to borrow the money.
Although these loan types do sometimes still require credit checks, you’re more likely to be approved for a short-term loan with bad credit. You’ll face a higher factor rate, but you’ll be able to get your money.
Lines of Credit
You may also be able to open a line of credit to get money for your small tech company. These accounts work much like a credit card, with a certain amount you may borrow from before paying it back later. You pay interest on the borrowed amount, and if you borrow all the money in the account, you’re out of credit until you pay it back.
Some companies do perform credit checks before opening lines of credit, but they don’t place as much importance on them. Instead, they focus on the success of your business and may only do a soft credit pull. So if your company is doing well but you have no credit and need a loan to expand, this is a great option.
Getting Small Tech Companies Off the Ground
Trying to get a loan when you have bad or no credit can be difficult. But there are lots of options for small tech companies that are just starting up. Explore your options, find the right lender, and be prepared to pay somewhat higher fees while you make this investment in your company.
If you’d like help getting a small business loan, get in touch with us at Dealstruck. We’ve helped more than 5,000 businesses get the money they need to get going. Apply for a loan now and get preapproved for up to $500,000 in minutes!