Defaults, judgments: How to fund them.

Defaults and Judgement's for non-payment or other contract disputes between private lenders and merchants fall into two basic categories: Settled and open.

Open judgement's mean there is an open claim on your assets including money in your business checking account therefore lenders are hesitant to approve any new funding. Settled defaults are easier but offers are still shorter term with higher rates. Some lenders won't fund any prior defaults at all.

The good news is that, although defaults in the Alternative lending industry stay with your business credit profile for life, they don't over-lap into conventional banking or credit score calculations. That is, issues with payments in cash advance lending world do not affect your fico score or ability to get financing from conventional sources like banks or SBA.

Recently, because of the huge dislocation(s) caused by state-imposed health restrictions on small business owners, there has been an increase in defaults especially in certain industries like restaurants and hospitality who have been particularly hard-hit. Many of these companies through no fault of their own were put into defaults and now are experiencing difficulty getting unsecured working capital.

Although there are challenges funding businesses with prior defaults it's not only possible but, in many cases the offers are every bit as good as if there were no defaults at all. It all comes down to finding the right lender; the big (lending) shops are like assembly lines and they rarely look closely at any individual files since they use algorithms & computer based approvals.

An effective broker can help by identifying which lenders are compatible with your file and also, because they do volume with the lender, they can influence the lender to look more closely at your file.

Bottom line: funding businesses who have prior defaults is more challenging but very possible. Honest and effective brokers are the most knowledgeable because they're immersed daily in the industry and know where to go to get results.

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