Lenders consider many factors before deciding if your business is creditworthy or not. You might think that finding a business loan for low-income earners is impossible. But, with excellent research and proper planning, you might just land the loan that matches your need.
Invoice financing
This is a type of loan that’s based on the unpaid invoices. This is an excellent option if you have a B2B business which invoices your customers. In invoice financing, you will choose the invoices that you want to borrow against. Then, the lender will provide 80% to 100% of the invoices’ worth. The lender will repay itself and add a small fee once the customer pays the invoice.
The business’ annual revenue is not a factor in this type of loan, which is why this is a good option for low-income earners. Lenders only consider the number of outstanding balances your business have, the probability of your customers’ timely payment, and your business’ financial history.
Equipment financing
If you have a low-income business and you need new equipment, equipment financing is the perfect loan for you. In this type of loan, the equipment will be the loan’s collateral, which lowers the lender’s risk. They will repossess and sell the equipment if you fail to pay the loan.
Repossessing lets the lender recoup their expenses. This also means that income requirement is less stringent compared to other types of loans. It’s like having a loan without providing your own collateral.
Most likely, the lender will factor in your financial history and annual revenue for them to assess if you’d be able to afford the equipment. The lender will most likely be less harsh in judging your business’ annual revenue because they focus more on the value of the equipment. Sometimes, those with bad credit can even qualify for this type of loan.
Short-term loan
This is another excellent option for low-income earners. The loan amount usually varies from $2,500 to $25,000. The interest rate usually starts at 10%. This is typically paid weekly in a span of three to eighteen months.
A short-term loan is an excellent opportunity not just because of its manageable terms but also because it lets low-income earners build their credit history. Once you have established rapport with your creditor and you have shown them that you are a good borrower, you will have a chance to qualify for a higher loan value in the future.
SBA microloan
The SBA microloan is a government business startup loan that’s made for startup, low annual revenue businesses. Just like the short-term loan, smaller, lower-income businesses may avail this type of loan. They offer up to $50,000 with 8% to 13% interest rate. This is another opportunity to build a credit history and lender rapport.
