While personal loans and credit cards focus on your personal score, some business financing alternatives are more flexible. There are even loan options that don’t require a credit check or that use soft inquiries (which don’t affect your score).
These alternative funding sources can be especially useful for entrepreneurs with lean or no business credit history. However, they often come with higher interest rates.
What is a no credit check loan?
Some small business loan providers don’t check credit as part of the application process. Instead, these lenders may use a variety of other factors to determine eligibility, including your business revenue and profitability. They may also look at your business’s industry, its size and risk of failure. In addition, some loans are secured by assets that the lender can repossess if you fail to make payments.
The most common way to get a business financing option that doesn’t involve a credit check is through a line of credit. This type of financing is often offered by payment processing and credit card companies. Mobile payment company Square, for example, offers lines of credit based on an applicant’s monthly invoices and repayment percentage. This type of financing is typically accompanied by high interest rates and fees, though it may be an appropriate solution for businesses that need funds right away.
Another alternative is a short-term loan, which is based on a borrower’s invoicing and revenue history rather than their personal credit score. This type of financing is often less restrictive than traditional options and may be available for businesses with low personal credit scores. Finally, some crowdfunding platforms offer loans to entrepreneurs without checking their personal credit or requiring them to sign up for a personal guarantee. This type of funding, however, is typically limited to small businesses that meet certain sales and profit requirements.
How can I get a no credit check loan?
There are a few lenders that offer small business loans with no credit check. These lenders typically evaluate a borrower’s creditworthiness by performing only a soft inquiry, which does not impact their credit score. However, these lenders typically have higher interest rates and fees than traditional lenders. Also, they may not report on-time payments to commercial credit bureaus, which can make it difficult for you to build your business credit history.
Many new and growing businesses have lean or no business credit histories, which can make it difficult for them to qualify for financing. There are several options for entrepreneurs with thin or no credit, including asking family members or friends for a loan; using paycheck advance mobile apps; and borrowing against your 401(k) retirement plan.
Some lenders use personal credit scores to evaluate loan applicants, while others use only the business’s financial statements and bank accounts. Some lenders will not check either, and may even require a personal guarantee from the borrower in order to approve the loan. To improve your chances of getting a loan, consider applying with multiple lenders and comparing their interest rates, fees, credit requirements and terms. You can also try to secure a line of credit through a business credit card or working with alternative lenders that provide business lines of credit.
What are the requirements for a no credit check loan?
There are business financing options that don’t require credit checks, but they tend to be more expensive. They often come with higher interest rates and shorter terms than loans that do require a credit check. These lenders also may request a personal guarantee from the borrower, which means that they promise to pay the loan back from their own assets if the business cannot.
The lending industry leans heavily on your business and personal credit history to assess your ability to repay a loan. This makes it difficult for many small business owners to get funding, particularly those with poor or no credit history. Fortunately, there are some financing options that place less emphasis on credit and can be easier to obtain for business owners with poor or no credit.
One option is a merchant cash advance, which offers fast funding for businesses that accept credit card payments. These lenders are typically willing to lend to business owners with a poor or no credit score as long as they can demonstrate that their business has the potential to generate enough revenue to repay the debt.
Another option is a working capital loan, which offers quick approval for businesses that need money to cover operating expenses. This type of financing usually requires a personal guarantee from the borrower and is usually only available to business owners who have a strong relationship with the lender (such as an existing account or a high sales volume). It’s important to note that working capital loans tend to be the most expensive of all the different types of business financing.
Where can I get a no credit check loan?
While many lenders check your credit, a few offer business financing that doesn’t require a credit pull. These loans usually come with higher interest rates and shorter terms, so they’re typically reserved for business owners with a lean or no business credit history. You’ll also find some lenders that promise guaranteed startup business loans with no credit checks, but be wary of these offers as they may be predatory.
Many payment processing and credit card companies have branched out into the lending space, offering loan options that don’t check your credit. These lenders usually review your current business cash flow and payment history and approve you based on that information. Invoice factoring providers offer similar financing to small businesses without the need for a credit score. These loans are typically based on your existing invoices, with repayment amounts and fees determined by a fixed percentage of your monthly sales or a flat fee.
Some lenders provide lines of credit to small businesses, with repayment based on your business’s ongoing cash flows rather than a fixed amount. These loans can be helpful if you’re seeking funds for an expensive startup or business expansion, but you haven’t built up your credit enough to qualify for more traditional financing. Regardless of which type of financing you’re looking for, be sure to gather all required documents ahead of time. These include government-issued identification, proof of income like pay stubs or tax returns, and financial statements. Consider using a money management app, such as Mint, to keep track of your business finances.no credit check small business loans