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This is a Guest Post by Sara Mackey. Sara is a business finance analyst and editorial manager at www.connexx.com, a guide in the field of small business finance since 1998.

Every business needs working capital in order to start-up, expand or maintain their company until it generates a positive cash flow. However, many small business owners have poor individual credit and cannot get approved for traditional business bank loan. There are small business loans for bad credit, but many of these loans will end up bankrupting the small business with exorbitant interest rates.

Both lenders and banks use credit scores and credit histories to determine the risk of a potential borrower. There are a few types of business loans or alternative financing available to obtain the business working capital needed for individuals who have bad credit.

Accounts receivable invoice factoring is one such option. Invoice factoring is a means in which a small business can convert their sales on credit terms into an immediate cash flow. A small business can sell their fresh invoices at a rate below their face value, usually between sixty and eighty percent of their worth, in order to obtain the capital they need. The potential line of credit is based on the strength of the invoices rather than on the strength or credit rating of the small business owner.

Business cash advance loans, also known as a merchant loan or merchant cash advance, is another popular option for small business loans for bad credit. A merchant cash advance loan is determined by credit or debit card transactions. Rather than paying the loan amount back in monthly payments, cash advance loans subtract a percentage of each credit card transaction. Business cash advance loans provide the business working capital without the stringent requirements of conventional business loans. Business cash loan amounts are determined by past transaction history rather than on the credit score of the business owner.

Venture or angel lending is another viable option for a start-up business or one that wishes to expand. Venture capitalist firms have had a tendency to stick to larger businesses with potential for huge returns, but many are starting to look at businesses that fill a niche. Angel investors and venture capitalists both provide risky or unproven businesses with financing, operate in the same financial sphere and both require an allocation of ownership shares, however there are a few differences between the two. Angel lenders are typically wealthy individuals, or a group of individuals, who invest in businesses with their own funds. Venture capitalists are corporate entities and provide financing using other investors money.

All businesses need working capital in order to start, expand or maintain their business. When personal credit is a problem for small business owners, they may believe they have no financing options. However, with these and other alternative financing, there are small business loans available.

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