Many small business loans require a credit check, but there are loan options that do not. These include merchant cash advance, payment processor loans and invoice factoring. Some of these financing options do not even use a hard or soft credit inquiry and can help you build your business credit.
Getting a Loan
A business loan is a great way to finance your small business. You can use the funds for a variety of purposes including purchasing equipment, hiring staff and expanding your operations. A business loan typically requires you to have good credit. However, there are loans available to business owners with poor credit and no credit at all. You can find these lenders online and in-person. Some do not perform a credit check at all, while others will only pull your personal consumer credit report to assess your eligibility. A hard credit inquiry can have a negative impact on your consumer credit score, while a soft inquiry does not affect your credit score.
Some lenders will require you to provide a personal guarantee or pledge your own personal assets as collateral in case you fail to repay the debt. These are known as secured loans and come with higher interest rates. Others will allow you to secure a loan with a commercial property, inventory or accounts receivable as collateral. Some lenders will also accept treasury and corporate bonds, certificates of deposit and outstanding invoices as collateral.
Many business owners struggle to qualify for a small business loan because of bad personal or business credit history. Others have no business credit and are just starting out. In these cases, you can find lenders that are more flexible and less likely to run your credit.
Finding a Lender
Many business lenders still place a heavy emphasis on personal credit, making it difficult for some new or established entrepreneurs to secure financing. However, there are specific types of business loans that focus less on personal credit, including options for those with poor or bad credit. These loans may come with higher costs and other requirements, but can be a good option for business owners who need to get funding quickly and are unable to wait until their credit score improves.
For example, some merchant service providers offer financing through their platforms, such as Square Loans and PayPal Working Capital, or through an alternative lender like National Business Capital. These options typically require less paperwork and are easier to qualify for than traditional bank loans, though they also may have higher interest rates. Another option is a small business line of credit, which gives you access to revolving financing. You pay interest only on the funds you actually use, which is ideal for short-term needs.
You can also check out community-based lending organizations, which typically fund businesses based on their mission or neighborhood. These can include programs that fund startups and minority-owned businesses, or those focused on developing areas of the city. You can also find grants and other funding opportunities from state and local government, as well as nonprofit organizations.
Interest Rates
There are several different types of business loans. Some have lower interest rates than others. The best one for your business depends on your situation. For instance, if you’re looking for speed, online lenders may be the best option, as their applications and approval processes can be less cumbersome than traditional banks. Alternatively, if you have a strong credit score and solid business track record, you might be able to get a traditional bank loan with a low rate. However, it’s important to remember that you’ll likely need to provide a certain amount of collateral to secure this type of loan.
Other factors that influence the terms of a small business loan include the business’s history, its character and cash flow. A lender will assess all of these to decide if the borrower is a good candidate for a loan and how much debt it can afford to take on.
Some small businesses are able to obtain financing without having to put up any assets as collateral, although this may require a longer application process. Some lenders also offer lines of credit that function more like a credit card, where you can draw funds up to a specific limit and pay interest only on what is drawn. Other options for small businesses include merchant cash advances, invoice factoring and crowdfunding.
Fees
There are lenders that offer no credit check business loans, but they tend to have higher fees than those with a conventional loan. When researching your options, be sure to carefully compare fees and repayment terms for each lender you find. You can do this by visiting the websites of the SBA, your local bank or credit union and online search engines. Also, make sure to review the qualifications that each lender sets for their business loans. Many of them will require your personal and business bank statements, balance sheets, income and cash flow projections, tax returns and credit scores.
You can also consider alternative financing options, like invoice factoring or crowdfunding. If you’re worried about your credit score, you can work on improving it by using a business credit card and paying your bills on time.
Some small business loans no credit check are backed by the government, such as Small Business Administration (SBA) loans. These typically come with strict qualifications, and most lenders require a credit check. Other loans are unsecured and don’t involve a credit check, such as those offered by mobile payment company Square or nonprofit Kiva. Square’s offers a line of credit with 0% interest, while Kiva’s borrower-supported loans are based on a social underwriting model. In either case, you should use a spreadsheet to keep track of your findings as you explore different lenders and their terms.