Small business loans can help your business grow, but qualifying for one isn’t always easy. If you have poor credit, you might consider getting a no-credit-check business loan. But there are a few important things to know about what loan options are available and how they work.
When you think of a business loan, you might think of a traditional loan that you get through a bank. With these types of loans, lenders evaluate you and your business closely for the five C’s of credit : capacity, capital, character, collateral and conditions. These five factors give lenders a solid understanding of how responsibly you use credit on behalf of your business.
Business loans that don’t require a credit check work a little differently. With these financing options, lenders focus on other aspects of your business, aside from credit scores, to determine how likely you are to repay what you borrow. That puts most no-credit-check business loans in the alternative financing category.
“Alternative business lenders have easier applications, more lenient credit requirements and potentially faster access to funds than traditional bank loans,” says Farhan Ahmad, co-founder and CEO of financial operating platform Bento for Business.
This chart highlights some of the things lenders take into account with no-credit-check loan options:
Note that this is not an exhaustive list of requirements. Individual lenders may have other conditions you need to meet to qualify for a loan.
There’s no specific credit score you can rely on for approval with all business loans, as it will vary depending on lenders and loan types.
A loan backed by the Small Business Administration usually requires a FICO credit score of 680 or higher, but other loan options could have higher or lower requirements. “Alternative lenders will work with lower credit scores, however, they will charge higher rates to mitigate the risk,” says Brian Cairns, founder of small business consulting company ProStrategix Consulting.
Lenders typically consider both your personal and business credit scores when making lending decisions. Personal credit scores are based on your personal credit history and habits. That includes the total amount of debt owed versus your total credit limit, payment history and how often you apply for new credit.
Business credit scores , on the other hand, tend to focus primarily on payment history. The size of your company, your relationships with your vendors and your business’s industry can also influence your scores. These scores can have a different range from FICO scores, which go from 300 to 850. The Dun & Bradstreet business credit score, for instance, ranges from 1 to 100. A higher or lower score indicates how likely you are to repay a business loan.
Many business financing options are designed for established businesses that have a minimum amount of operating history. If you have a new business, getting financing may be a little more challenging, but it’s not impossible.
You can get startup business loans with bad credit, but your loan options might be limited to online lenders specializing in bad credit borrowers. And they may require at least a few months in business to qualify.
The downside of these types of loans is that they’ll likely cost you more money. If you have bad credit or no credit and your business hasn’t yet proved itself profitable, your loan is much more risky than one extended to an established business with good credit. Your lender can offset that risk by charging you more fees or a higher interest rate for the loan.
Crowdfunding is another option for getting business loans without a credit check. Some platforms allow people to invest in businesses around the world as a way to do good. There are others that allow businesses to offer their backers perks other than money as a thank you for funding their campaign. For example, if you run a startup that needs capital to manufacture an innovative type of reusable water bottle, you could give your backers some sample product once you have some produced.
The upside of these types of crowdfunding platforms is that bad credit may not matter for getting a loan. Instead, your ability to get financing is based on the merits of your campaign. There are two drawbacks to keep in mind, however. First, if your campaign isn’t successful and you don’t raise the full amount of money you’re seeking, you might not get any of the funds. And second, certain platforms may charge you a fee to launch a campaign.
The chief benefit of getting a no-credit-check loan for your business is being able to access funding even if your credit might prevent you from getting a traditional business loan. And getting access to funding could give you the opportunity to build credit for your business. By making payments on time and reducing your loan balance, you can create a stronger business credit profile, which could make borrowing in the future easier.
The chief downside of no-credit-check loans is potentially higher interest rates. The higher your rate, the more the loan costs over time. But the cost of financing might be worth it if it means increasing your revenue.
Something else to keep in mind is how much you can realistically borrow when you have poor credit. If you aren’t able to get the full amount of money you need, that could make it more difficult to pursue your borrowing objectives.
Do you need good credit to get a business loan? Not necessarily. There are loans you can get with no credit check at all. You just might pay more in interest and fees.
Aside from business loans, there are other ways to fund your business. Those include:
Each one has its pros and cons. A personal loan, line of credit or credit card may be easier to qualify for, for instance. But commingling personal and business finances can be problematic. If you default on the debt, your personal credit scores would take a hit and you would be personally responsible for repaying the debt.
Equity financing and borrowing from friends and family can also have its ups and downs. With equity financing, you ask investors to back your business, and in exchange they receive an ownership stake in it. You don’t have to repay any money to those investors, but you’re trading off full control of your business. And borrowing from friends and family can get tricky if you aren’t able to pay the money back.
If you’re seeking a no-credit-check business loan, it’s likely you have bad credit or no credit. If you improve your credit rating, you can increase the number of business loan options available to you.
You can improve your personal credit scores by:
With business credit scores, the best ways to improve are paying your bills on time and maintaining good relationships with your vendors and suppliers.
Try to fix your scores first, Cairns says. If that’s not possible, then take the minimum amount required from some alternative lender while fixing your score. “That way,” he says, “you can refinance or get an additional loan at a better rate later.”

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