Many business loan lenders rely on credit history for approval, and this can be challenging for those with no or poor personal credit. But there are alternative funding solutions that focus more on business performance and less on credit score.
One example is PayPal Working Capital, which only reviews your business’s sales through the point of sale platform. This provider also doesn’t use hard inquiries that could lower your consumer credit score.
No Credit Checks
Financing is a necessary part of starting and growing any business. However, finding financing when you have bad credit or no personal credit is a challenge. Traditional business lenders will always run a credit check, but there are lending options available for those with less-than-perfect credit.
Many microlenders and nonprofit organizations offer loans to small businesses with no credit check at 0% interest. PayPal Working Capital is another option that only requires a PayPal account and a history of selling through Square’s point-of-sale system to be approved for funding. Other funding options for new and small businesses that don’t require a credit check include invoice factoring (Fundbox is one lender with this type of financing) and merchant cash advance lenders (like FundThrough) that provide funds based on future credit card sales instead of a business owner’s personal credit.
There are also a few lenders who claim to offer no credit check business loans for startups, but this is often misleading. Even these lenders will check the borrower’s credit at some point, usually using a soft inquiry to determine eligibility and then a hard inquiry before disbursement of funds. These types of business loan offers are also typically more expensive than other financing options and have shorter repayment terms. To improve your chances of getting a business loan with better terms, focus on improving your personal and business credit scores.
No Collateral
If you have a bad credit score and need financing for your small business, there are some funding options available to you that don’t require a credit check. However, these types of financing are usually more expensive and have more restrictions than traditional loans. Before applying, it’s important to understand the different requirements and rates associated with each type of funding. To find the best solution for your specific situation, it’s recommended to speak with a funding specialist.
Many online lenders offer business loans without a credit check. However, it’s important to know that most of these lenders will perform a credit inquiry before approving a loan. Some may use a “soft” inquiry that does not impact your credit score, while others will use a hard inquiry to assess your risk. If you have a bad credit score, it’s best to focus on improving your personal and business credit before seeking a loan.
Some lenders provide no-credit-check business loans that are secured by your accounts receivable and inventory. These loans typically come with high interest rates and are short-term. However, they can be an excellent option for newer businesses that are unable to qualify for traditional business financing. Keep in mind, though, that not all lenders will report your on-time payments to the commercial credit bureaus. This can make it difficult to build a good business credit profile.
High Interest Rates
While the lending industry leans heavily on credit scores, it is possible to find business loans that don’t require a traditional business credit check. However, these types of loans are often accompanied by higher interest rates and come with extra terms and requirements.
A business loan is an amount of capital that a lender agrees to lend to a small business for a set period of time at a predetermined interest rate. A business owner must make payments on the principal and interest owed to the lender for each month of the loan term.
Many traditional lenders will only provide a business loan to a small business that has a positive credit history and a high FICO score. This makes it hard for some businesses to obtain a small business loan when they need one, especially if they are just starting out or have bad personal credit.
There are several options for getting a no credit check small business loan, including alternative lenders that use other criteria to evaluate applications. These include invoice financing, which uses unpaid customer invoices as collateral for a line of credit. The financing company will advance a percentage of the total value of the invoices and charge a fee for its services.
Another option is to get a co-signed business loan from someone with a good credit score and steady income who can make payments on the behalf of the small business. This type of small business loan is usually less expensive than a conventional small business loan, but the co-signer must be willing to take on some responsibility for repayment if the business fails to make payments.
Short Term
Financing is needed at every stage of a business’s life cycle to start, run and grow. There are plenty of business funding options, but many lenders require credit checks to approve small business loans. Fortunately, some lenders specialize in no credit check business loans. They look at other factors, like invoicing and sales, to determine whether to offer a loan. Many of these lenders also allow applicants to prequalify before they submit an application. In addition, these lenders only do soft credit inquiries that don’t impact your score.
Other options for no credit check small business loans include crowdfunding and grants. Crowdfunding sites such as Kickstarter and Indiegogo let potential investors see your proposal and provide funds if they are interested. In addition, grants are often available for certain groups of people, such as minorities or those operating in low income areas.
Some lenders that do not check credit are more selective about what they finance. For example, Fundbox provides lines of credit based on invoice collateral from $1,000 to $100,000 and focuses more on a business’s invoicing and revenue than its credit history. Another lender, PayPal Working Capital, requires a minimum of 3 months of transactional data from your business’s bank and merchant accounts to qualify for financing. This is why it’s important to research all the different alternatives for no credit check small business loans to find what makes the most sense for your company.