Qualifying for a Mini-Bond with Bad Credit

A mini bond is a government issued bond that assists private business owners in raising capital. If the government approves your business to release mini bonds, it will do so on your behalf. You can use the cash generated to start your project or finance your company. You must repay the government the initial principal plus interest, but the bonds can be affordable if you qualify. This alternative financing option may not require you have good credit so long as you meet other qualifications. 

Industrial Development Revenue Bond (IDRB)

One way you can qualify for a bond program, often with bad credit, is meeting the needs of the Industrial Development Revenue Bond program. This program encourages job development, the saving of local jobs, or the growth of a local tax base. These bonds typically go to companies offering large industrial centers to a local community. Because of the tax base and job base this will contribute, the government has an incentive to help finance the business.

IDRB opportunities often have a great amount of processing expense. Qualifying can be a lengthy process, and it is truly only feasible for a very large operation. However, the process to qualify is not at all like a normal loan. This means businesses with low or no credit may be considered on factors independent of their financial security. 

Tax-Exempt Mini-Bond

Mini-bonds are smaller versions of the IDRB program tailored for individual business owners. Fees and interest rates are lower, but the qualifications in terms of the type of business applying are still restrictive. Participants in tax-exempt mini-bond program go through an application and qualification process similar to any other loan program, private or public. You must be qualified based on your creditworthiness and personal financial status. There is a three-step process to meet these qualifications:

  1. Eligibility - An applicant will first need to be eligible based on the project at hand. These bonds are open to manufacturers and non-profit, 501(c)(3), organizations. If you do not meet these criteria, you are not eligible for this type of bond program. You may need to approach private lenders or attempt to guarantee a private loan through the Small Business Administration instead of relying on a bond program.

  2. Application - You will have to prepare an application that is more detailed than a traditional loan application. This will include extensive details about the cost of your project and your company's financial statements. You will also have to answer questions about how many jobs you intend to create or save and the taxes you expect to contribute.

  3. Closing - If you qualify for the bond program based on these factors, which include but are not limited to credit score, you will receive the funds into an escrow account. You can withdraw from this account as needed according to the laws of your state. Each state is responsible for issuing the funds ultimately because they involve local job creation and a local tax base.