Maybe you need a loan to start your business or launch a new product or division, or perhaps you are dealing with the unexpected, like a dip in revenue, costly repairs and renovations, or 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 secure it: your business credit.
Unfortunately, for some business owners, a credit check could be out of the question. Some simply don’t want a hard inquiry to show up and subsequently damaging their existing credit score, and others are intimately familiar with their credit score and know that, in some cases, it can immediately disqualify them. Whatever the reason is, identifying a financing option to fit your needs can be difficult, but it’s not impossible. There are a variety of options, including working capital loans through your payment process, merchant cash advances, invoice factoring, and crowdfunding.
PayPal Working Capital Loan (Payment Process)
PayPal has long been viewed as a popular payment processor, but they also offer working capital loans, or loans that can be used to finance everyday operational expenses, e.g., payroll, accounts payable, etc. If you use PayPal as a form of payment, either online or in store, then the 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.
Borrowers can take out a loan for up to 35% of their total annual PayPal revenue, with a $120,000 limit between your first two loans.
Rates & Fees
Eligible borrowers will pay a single, fixed-fee that is determined prior to accepting the loan. There are no additional interest payments or fees. The fixed fee is on the loan total; your PayPal sales history; and the selected repayment percentage, which is the percentage of each sale deducted and paid towards your loan.
Payments are automated and deducted from each PayPal sale, referred to as the “repayment percentage.” Though percentage repayment rates can vary based on the amount of the loan amount, typically borrowers can select a repayment rate between 10% and 30% per transactions. If no PayPal sales occur during a specific time, no payment is made; however, all borrowers are expected to pay either 5% or 10% of the total loan amount over a period of 90 days. In addition to the repayment percentage, borrowers can also make manual payments.
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First American Merchant (Merchant Cash Advance)
Another way to secure a credit-check free loan is through a Merchant Cash Advance (MCA), and though some financers do require a credit score, First American Merchant does offer an option for small business owners that don’t currently have an existing advance. However, First American Merchant (FAM) does offer a no-credit-check MCA and credit check MCA, and so it may be best to contact them via phone to begin the application process.
Limits are based on the monthly volume and borrowers can take out up to 1.5 times the monthly volume based on three months of bank statements.
To be eligible for a merchant cash advance through FAM, you will need to be in business for at least six months, have at least $10,000 in gross monthly deposits, and have less than three insufficient funds events on your account per month.
Additionally, you, or the applicant, must be willing to undergo a background check in which FAM will verify that you meet their requirements, including the absence of criminal charges or felonies, etc.
Rates & Fees
All advances are subject to a factor rate, which is typically between 6% and 50%. For example, a loan with a 45% factor rate on a $10,000 would result in a final repayment amount of $14,500. Those choosing a no-credit check advance will likely be subject to a higher fee.
This lending option is considered “short-term,” and so advances are typically repaid within three to six months, depending on the terms. Repayment is made via daily or weekly ACH payments, though the amount varies by the applicant based on the business type, the amount borrowed, and other undisclosed underwriting factors.
BlueVine (Invoice Factoring)
If you’re a corporation and not a sole proprietorship, then you may be interested in BlueVine’s invoice factoring product, which allowed you to leverage outstanding invoices. BlueVine does run a soft credit inquiry, so though they will “check your credit,” it will not be reflected on or impact your credit score.
Eligible applicants can borrow up to $5 million, though the requirements and application process varies for lines of credit over $250,000. Therefore, anyone seeking to borrow more than that should contact BlueVine directly for additional information.
Additionally, it’s helpful to keep in mind that borrowers typically receive 85 to 90% of the total amount of invoices being factored. The rest, minus a predetermined fee, becomes available once the invoice is paid in full.
Rates and Fees
Rates and fees vary, but typically, borrowers can expect an APR between 15% to 68% as well as a weekly fee between .25% and 1.1%.
In this case, repayment takes place on behalf of the client or customer to which the invoice is sent. Once they pay in full, BlueVine will pay you the remaining invoice amount (subtracted from the original amount disbursed originally) minus and additional fees. In most cases, this type of lending option has a term of 90 days.
Indiegogo is a popular entrepreneurial crowdfunding platform that has helped over 650+ businesses or projects reach their goals. Though this is a way to get access to funds without a credit check, crowdfunding is far from traditional lending, and in most cases, it will take time to get the funds you need. In other cases, you may not meet the financial goals of your crowdfunding campaign. However, if you’re a B2C company and you’ve exhausted all other no-credit check options, it may fit your needs.
Technically, there are no limits to your funding goals. You set the required amount. The catch? You must cultivate a loyal community of “backers,” or those who choose to invest in your product. For that reason, this is considered an active form of financing – you can’t just fill out some paperwork and sit back.
There are few specific eligibility requirements, but generally speaking, your campaign must be for one of the following: for-profit business, a nonprofit organization, products or goods, etc. Assuming your goal is to finance a part of your business, it’s likely you’ll meet these general requirements.
However, for a successful campaign you’ll need a pitch video (1-3 minutes); a written pitch; a title, short description, and accompanying image; and a perk or perk strategy, or what backers get in exchange for their donation – typically a discount, early access to product, free product, etc. In other words, you’ll want to revisit your business plan and your marketing skills.
Rates & Fees
Pre-launch activities on Indiegogo are free, but once you begin your crowdfunding campaign, you’ll have to pay 5% of the total earned in the form of a platform fee, and then 3% +$0.30 for third-party credit
Aside from the fees mentioned above, which are deducted directly from your campaign funds, there are no repayment requirements.
That said, Indiegogo offers to campaign types: one that lets you keep all the funds even if you don’t meet your goals by the end of your campaign and another that will refund investors if you do not reach your goal.
Finding a traditional loan that doesn’t require a credit check can be difficult, if not near impossible. However, today’s modern lending economy has opened the door for alternative loans, some of which do not require a credit check. If you are seeking for one of these, you may want to first check with your payment process, like PayPal, and then turn to other alternatives like merchant cash advancements, invoice factoring or financing, and crowdfunding.
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