Maybe you need a small business loan to start a business or launch a new product, or perhaps you are dealing with the unexpected, like a dip in revenue, costly repairs or renovations, or increased staffing needs. Regardless of why you need the extra capital, there’s one thing that will likely govern how easy—or difficult—it is to get funding: your credit.
Getting approved for traditional business loans can be a challenge even for businesses with solid qualifications. Banks and other small business lenders often want businesses to be in operation for at least two years and they prefer to lend to small business owners with good credit.
But not all lenders care about your personal credit scores. If your credit isn’t strong, you may want to understand how these business financing options work and where to find them.
Why Consider No Credit Check Business Financing?
Some lenders check personal credit, some check business credit scores and some check both. A few don’t check credit at all when reviewing business loan applications.
Unfortunately, for some business owners, a credit check could be out of the question. Some simply don’t want a hard inquiry to affect their personal credit scores, and others know their poor credit scores will likely immediately disqualify them.
In other cases, business owners are looking for loans that don’t require personal guarantees. Their goal is to separate their business and personal finances completely.
All are valid reasons for wanting to avoid a credit check. But the reality is that most business lending options do review personal credit. And that’s especially true for startups, or for businesses with few employees or without significant time in business and/or revenues.
A variety of options, including working capital loans through your payment processor, merchant cash advances, invoice factoring, and equipment loans that can be much more credit flexible.
Here we’ll focus primarily on business loan options for small business owners with poor credit. These small business loans typically consider other qualifying criteria like annual revenues to approve applicants.
We’ll also feature business financing that doesn’t require a personal credit check, and we’ll describe types of financing that don’t require personal guarantees.
Pros and Cons of Getting a Business Loan with No Credit Check
Again, many types of small business financing require a personal credit and/or require good personal credit scores. But when they don’t, there are both benefits and drawbacks.
- No impact on personal credit scores
- Personal guarantee likely not required
- Often approved very quickly
- Tend to have high interest rates/costs
- Short-term loan repayment periods common
- Loan amounts may be smaller
Can I Get A Business Loan With Bad Personal Credit?
Many lenders check credit to determine whether the business owner’s personal credit scores meet their minimum requirements. Negative items on your personal credit history, such as late payments, collection accounts, or bankruptcies, may lower your scores and put you in the high risk category.
However, some business lenders check personal credit primarily to rule out serious problems, like an unfinished bankruptcy or to deter fraud. In those cases, low credit scores may not be a disqualifying factor.
And as mentioned earlier, some providers look primarily at business revenues during the underwriting process.
How to Know if You Have Good or Bad Credit
If you haven’t checked your credit, it’s a good idea to do so before you begin the application process. Every lender has its own minimum credit score requirements, and each will decide what credit scores qualify as “good credit” or “bad credit.”
Generally, those with scores around 650 and above have more options available. Those with scores in the 500s or lower have fewer options. And, as we will share in a moment, a few loan options don’t check credit at all.
Hard vs. Soft Inquiries and the Impact on Your Credit Score
The obvious benefit to no credit check loans is that there will be no hard credit check (inquiry) on your consumer credit reports. Inquiries may slightly lower your credit scores, though the effect is often temporary.
A hard inquiry is one that affects credit scores, while soft inquiries don’t. Soft inquiries may be used by some small business lenders to screen applicants while hard inquiries often take place once the business owner decides to apply for financing.
Inquiries typically lower credit scores by a few points (less than 10 points is common) and most credit scoring models don’t count inquiries that are more than a year old.
Types of No Credit Check Business Loans
A few types of financing don’t typically check personal credit, or if they do, don’t generally require high credit scores:
Business Cash Advances
Here your business can get an advance against future revenues, based on historic revenues. Business cash advances (or merchant cash advances) are typically available to businesses with strong cash flow, backed up by merchant account or business bank account statements. While there may be a performance guarantee, a personal guarantee is rarely required.
This type of financing allows businesses that invoice other businesses to get paid faster. Companies offering invoice financing will advance funds from the invoice immediately and in some cases even collect the payment directly from the client. Chances are no personal guarantee is required, and factoring may even be made on a non-recourse basis, which means the business is not liable for uncollectible invoices.
Vendor or Supplier Financing
Here, your vendors or suppliers will offer short-term financing for products you purchase directly from them. Net-30 financing terms give the business 30 days to pay, for example. This type of financing does not typically require good credit and there is often no personal credit check. A business credit check may or may not be required.
As a plus, this financing usually does not require a personal guarantee.
Most crowdfunding sites do not require a personal credit check. You can raise money for your business either by offering rewards or equity in your business. Loan-based crowdfunding is also a possibility though a credit check is more likely in that scenario. Personal guarantees are rarely required as well.
Read: Kiva offers 0% no fee loans up to $15000 to businesses in the US.
In addition there are several types of financing that tend to have very flexible credit requirements:
These smaller loans are often made by non-profit lenders (CDFIs) that try to help underserved borrowers. Microlenders are sometimes able to work with borrowers with less than perfect credit. A personal credit check and personal guarantee may be required, so be sure to check.
No Credit Check or Low Credit Business Loans
Here are specific business loan options to consider if you are looking for business financing with low credit score requirements.
Business Cash Advance by Credibly
Credibly offers invoice financing and cash advances. There will be a soft credit check but decisions are based on a variety of factors.
Business Cash Advance by Rapid Finance
While this merchant cash advance company may check your credit, you still can qualify for business financing with lower credit scores because Rapid Finance also looks at your time in business, revenue, and accounts receivable.
Capitalized offers business financing for business owners with a personal FICO score of 500+. Your business must be at least a year old, and you need business revenues of at least $20,000 monthly.
PayPal Working Capital
PayPal has long been viewed as a popular payment processor, but it also offers working capital loans that can be used to finance everyday operational expenses, e.g., payroll, accounts payable, etc. For businesses with a PayPal account, a PayPal Working Capital Loan may be an option.
To be eligible for a PayPal Working Capital Loan, you must have a PayPal Business or Premier account for at least three months. Business account holders must process at least $15,000 annually, while Premier account holders must process at least $20,000 annually.
Alternative Financing Options for Bad or No Credit
In case you want even more business funding options, here are others to consider:
If you’re specifically looking to purchase equipment, such as heavy machinery or a computer, equipment financing is designed for this purpose, and some lenders are more flexible when it comes to credit scores.
Business Credit Cards
Most small business credit cards check personal credit, and good credit scores are usually required. There are only a few business credit cards for bad credit. They may have higher interest rates, but if you pay your bill on time each month, you can build your credit and hopefully qualify for better options in the future.
Retirement Account Loans
You can borrow against 401(k) retirement accounts without a credit check. Unfortunately you can’t borrow against an IRA. Another option is to roll your retirement funds into a ROBS plan that is used to fund your business. Since you’re putting retirement funds at risk, you want to make sure you have a solid business plan first.
Do SBA Loans Require Credit Checks?
Generally, SBA loans require a personal credit check. Some loans also require a business credit check. However, most SBA loans don’t have a minimum credit score requirement. “Acceptable credit” is required, though, and most lenders who make SBA loans require good or excellent credit scores.
Notably certain SBA loans – SBA Small Loans and Community Advantage Loans – require the lender to check a FICO SBSS credit score and minimum scores of 155 or 140 respectively are required to pass the prescreen.
Find No Credit Check Options That Fit Your Needs
Finding a traditional loan that doesn’t require a credit check can be difficult, if not nearly impossible. However, today’s modern lending economy has opened the door for alternative funding options, some of which do not require a credit check.
If your main goal is to avoid unnecessary credit checks when you apply for small business financing, Nav can help.
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5 responses to “The 4 Best Business Loans You Can Get with No Credit Check”
I’m happy to see there are a few organizations out there that offer financial assistance; however, what about those start-ups that have not yet begun to bring in revenue?
There are fewer financing options for startups. We talk about those here.
PLEASE HELP ME. HAVE BEEN DENIED FOR SBA DISASTER SSI DISABILITY AND PPP .. UNEMPLOYMENT. .
James, please reach out to your local SBA resource partner as they provide free mentoring.
TNJ Roofing and Handyman services is a small Buisness in which we want to get going again and get our life’s back! We were doing so great before this pandemic yet after lockdown it was like we had no customers to turn to we need advertisement again which we could do if we had a loan yet we can’t find one! We need abt 10000 to get back up where we need to be which isn’t a lot of money yet so impossible to get! We need to buy new equipment and materials advertising to get started up with no sliding back we do roofing and handyman construction work of many kinds if we could find the help we even have a car we’d put up for doing so we have that much faith that we can get our Buisness steadily going again! Thanks and may God bless u! Our government really hurt us and it’s sad that they care if they’d bring us money back to help we could do it without asking! Yet rent utilities and Buisness campaigns alone can be costly with the government acting out like children! God bless all u who are helping ppl to get their lives back!