Now more than ever before, you have the ability as a business owner to acquire the capital your business needs with very little hassle.
What once served as gatekeepers and hurdles to acquiring business funding – major banks and your credit history most notable among those factors – have stepped aside in favor of more flexible and sensible lending criteria through alternative lending.
Even bad credit is now surmountable, with alternative lenders taking into account a wide variety of factors for approval, such as revenue and the debt-to-income (DTI) ratio of your business.
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But, just as with any financing method, there is an approval process, so you need to know what lenders are looking for to give yourself the greatest chance of approval for any type of bad-credit business loans.
1. Know what lenders are looking for.
First, you need to know what the average lender is looking for when they review your application. Keep in mind that every lender has their own slightly different approval methods and places weight on certain factors more or less than other lenders. However, there are criteria that all lenders use that you should be aware of and, ideally, get in order before applying to improve your chances of approval. This isn't always possible, but, at the very least, it's useful to know what lenders look for when reviewing your application.
Debt: Lenders want to see that your debt is under control. It's OK to have it, but you should show a history of on-time payments and a good DTI ratio.
Revenue: Lenders want to see that your revenue is high and growing consistently. Your revenue is what you'll use to pay them back, so they need to see that you have the ability to do that. Clear signs of growth are especially important.
Cash flow: Cash flow needs to be two things: high and well managed. You can't have low cash flow but spend it well, or have high cash flow but consistently blow it all. Lenders want to see that you not only have it, but that you're smart with it once it's in your hand.
By having these three factors in place – low debt with a history of on-time payments, high revenue with consistent growth, and healthy cash flow that is well managed – your chances of approval for a business loan with bad credit are much higher than without them.
2. Make sure you meet the minimum borrowing requirements.
As with approval criteria, every lender has their own minimum qualification requirements for you to apply for a loan. These are most lenders' basic requirements:
Time in business: You must have been in business for anywhere from six months to two years depending on the lender.
Minimum monthly revenue: Many lenders require a minimum monthly revenue, often $10,000 or more.
In good standing: Lenders won't want to work with you if you are behind on payments with another lender, are in collections, or have a history of nonpayment.
3. Get your documents in order.
Now that you have a better idea of what lenders look for when reviewing your funding application, it's time to gather the necessary documentation for approval.
Every application is different, so a lender may request a particular document from you that they won't from another applicant. It's useful to have all of the below documentation in order, just in case the lender requests it:
Proof of ownership
Personal and business tax returns
Profit and loss statement
Property lease agreement
This has the added benefit of speeding up the approval process, which is especially useful if you need the funds expedited.
4. Review your bad-credit business loan options.
With everything now in order, all that's left to do is await your response from a lender. However, it's important to review your potential funding methods as well. By becoming more familiar with some of the more common loan products, you'll have a better idea of which is the best fit for your business and funding needs.
Here are some of the most notable alternative funding options for those with bad credit:
Unsecured business loan: An unsecured business loan doesn't use traditional collateral to guarantee the loan, but interest is often higher. They go up to $2 million, depending on the lender and approval amount.
Business line of credit: Like a credit card, a business line of credit gives you access to a revolving balance of credit. Limits are often lower than those of traditional loans, but the flexibility and convenience are unmatched.
Term loan: A term loan is a standard loan, a lump sum that is paid back within a specified period. Thes are most useful for one-and-done purchases, such as an additional product for a busy season or new equipment.
Split funding/merchant cash advance: This is great for businesses that have a regular flow of credit card sales. It takes a percentage of your daily sales to pay back the loan, which makes paying off the loan super convenient.
Ultimately, it's up to you to decide which funding option is best for your needs. However, your lender will typically walk you through the pros and cons of each, helping you make an informed decision depending on what you're approved for.
Take the time to make sure you have each of these elements in order, not only to maximize your chance of approval but to streamline the process, making it fast and painless. In fact, approval with most lenders takes no more than 24-48 hours with minimal paperwork – a far cry from the legions of signatures required for a traditional bank loan.
Lack of funding is one of the primary reasons for business failure. Bad credit doesn't have to hold you back from obtaining the capital your business needs to spur and maintain growth.
As a manager with a technical background, I struggled for a long time to evaluate candidates for positions outside of my expertise – especially user experience designers.
Experienced UX designers are one of the most coveted talent assets among small businesses, especially those that rely on tech, which is part of the reason why designers have one of the highest turnover rates in the industry at 23.3 percent. But if you don't have a design background, it can be difficult to gauge exactly how much value a good UX designer adds to your small business – especially because the job title itself can mean so many different things.
UX design is influenced by multiple factors, which means designers need to know how to deliver high-quality work that satisfies multiple perspectives: managers, developers, executives and, of course, users. But because that blend of skill and personality is hard to quantify, some businesses end up missing out on all that UX designers have to offer.
If given the right work environment, UX designers offer a variety of skills to help a small business become more efficient, more user-friendly and more innovative. UX design is a spectrum, so depending on the strengths of the designer you hire, you can use these employees for everything from prototype mock-ups to customer research.
It took me years of hiring designers and finding their replacements before I began to truly see the possibilities that UX designers offer. That's why I put together this cheat sheet to help other managers. A UX designer excels in one or more of the following areas to help your small business thrive.
1. They can think through systems.
UX designers see the big picture. They have the ability to organize complex processes into simple solutions. When they talk about design thinking, they get excited about conquering major obstacles (even for innovative, enterprise-level solutions).
If you work in a field with countless moving parts, you need a systems thinker. Once on your team, these designers will spend their time interviewing stakeholders and users, following user journeys, and sketching different possible pathways. Be on the lookout for candidates who can turn the confusing into the efficient, and give them challenging, complex problems to work on from across departments to sharpen their skills.
2. They can be artistic.
Some UX designers lean toward more artistic thinking. They'll come with portfolios full of sketches, drawings, or digital animations and have an innate talent for compelling visual work. These artsier candidates might need someone to guide them on the technical side of things, but given how heavily UX design relies on sight, these workers make great options for companies that require eye-grabbing prototypes.
Artists know how to distill a concept down to its core and make that core as appealing as possible. Visual work takes practice to perfect, so if you give these artists plenty of time and space to hone their craft, it will pay off. Consider building more creative time into your UX designers' schedules to maximize their value for your small business.
3. They can gather customer insights.
Some companies have entire positions or departments dedicated to the user experience. But for smaller businesses, the designers need to know how to research, and UX designers know how to do this better than most.
When evaluating candidates, look for those with user outreach and interviewing in their profiles, but don't stop there. Interview to discover who asks good questions and shows empathy.
Build research and testing into every cycle of product development to give these designers a chance to improve the product using their unique skills. They know how to find the answers, but they usually need the go-ahead from management to flex their research muscles.
4. They can improve the product.
Some companies, like corporate innovation centers with agile teams, need to see working prototypes as quickly as possible. As natural tinkerers, UX designers are perfect for that role.
If you prioritize speed above all else, look for UX designers who demonstrate a history of learning new design tools, attending classes and maker fairs, and playing with experimental concepts. Within your team, open lines of communication between designers and developers so they can see how their designs are implemented and create even more efficient processes.
These designers are perfect testers of potential new tools, such as an Alexa skill or Bluetooth connectivity in a piece of hardware. If the team wants to implement a new technology for a new feature, let a UX designer team up with a developer to take a crack at it first.
5. They can also manage.
The best managers are process-oriented people. They stay up to date on trends by reading blogs, following thought leaders and attending meetups with fellow designers. Sure, UX designers know how to do the design work, but they also see how that work fits into the broader picture of an organization – a perfect skill for a future manager to nurture.
If your small business wants designers who could one day become more, look for people with a passion for human-centered design and a history of organized efficiency. These designers can speak capably with stakeholders from across departments, and they'll show an interest in the data that their work produces. These high-potential UX designers are introspective about processes and always ready to pursue improvements.
As a business leader, you should allow UX designers to adjust the processes around them after they get some experience in the environment. Not only will this improve business processes in the short term, but it could also help designers take steps toward future leadership responsibilities.
The future of UX design
According to research from Adobe, 87 percent of managers have made hiring UX designers a top priority. That should be good news and bad news for small businesses. The good news is that more and more businesses are realizing the value of UX designers, which means they'll have more opportunities to provide value. The bad news is that there will be more competition among employers for talented designers.
Given that artificial intelligence could transform some parts of human-driven UX design in the coming years, the pool of designers who can truly make a difference isn't getting any deeper. Companies need to know who they're hiring and get it right on the first try.
Perhaps the biggest reason UX designers are so hard to evaluate is because no two designers are alike. Some want to work closely with their teams, and others are more interested in the idea of working freelance. But the best designers add value through not only the quality of their work, but also the way they help their organizations see processes and problems in a new light.