How to avoid a hard credit pull with business lending options

What is a hard credit pull and why does it matter?

A hard credit pull, also known as a hard inquiry or hard credit check, is created when a lender reviews your credit report as part of the loan approval process. It’s most commonly associated with consumer loans like credit cards, mortgages, auto loans, but some lenders check personal credit for small business loans.

During a hard credit pull, the lender requests access to your credit report and/or a credit score from one or more of the major credit bureaus. The inquiry notes who checked your credit, and the general purpose (such as a loan or credit check). 

Here is an example of an inquiry:

Hard credit pulls can lower your credit scores. The exact impact varies depending on your overall credit history and the number of recent hard inquiries but usually a single hard inquiry might lower a FICO^® score or VantageScore^® credit score by roughly three to seven points. 

Inquiries typically remain on consumer credit reports for two years, though the impact on credit scores usually diminishes over time.

You can learn more about how hard inquiries affect your credit scores in this Nav guide. 

Hard vs. soft credit inquiries

What are the qualifications for a business loan?

Qualifications for a business loan can vary depending on the lender, the type of loan, and your specific circumstances. However, there are three main factors that many lenders typically consider:

1. Revenue/cash flow: Lenders want to see consistent revenue and profitability to ensure your business can generate the income needed to repay the loan. They will often require copies of business bank statements or even tax returns to verify revenue. 
2. Credit scores: Some lenders check personal credit, some check business credit, some check both. And a few lenders don’t check credit at all. Higher credit scores typically mean less risk, and that can raise your chances of qualifying and getting favorable terms. Some business lenders only use soft inquiries for personal credit checks. 
3. Time in business: Some lenders require that your business has been operating for a certain period of time, often at least one or two years, before they'll consider your application. 

Other factors can include your industry, debt-to-income ratio, or available credit.

The application process depends on what you apply for. Traditional lenders typically have stricter requirements and a longer loan application process. Alternative lenders, like online lenders offering business lines of credit, can have a more streamlined and fully digital process — often without requiring a hard credit pull.

Business financing options: Avoiding a hard credit pull with bad credit

If you have low credit scores, you may want to try to avoid a hard credit pull. 

There are several business financing options that focus mainly on factors beyond credit score. These alternatives typically evaluate your business's revenue, outstanding invoices, or supplier relationships instead.

Business cash advances

A business cash advance (also called a merchant cash advance) provides an advance against your future revenues based on historic sales. This type of funding typically doesn't require a hard credit check. If these companies do check personal credit, it’s often a soft credit check which doesn’t impact your credit scores. 

How it works: The funding company looks primarily at your business's cash flow and daily credit card sales. Typically you’ll receive a lump sum upfront and repay it through a percentage of your daily credit card receipts or a fixed daily or weekly payment.

What to know:

• Funding can be fast, sometimes within 24 to 48 hours
• Costs are typically higher than traditional loans 
• Best for businesses with healthy sales and need for fast funding

Popular with: Retail stores, restaurants, and other businesses with regular credit card and debit card transactions who need quick access to capital.

Invoice financing

Invoice financing lets you access cash tied up in outstanding customer invoices without requiring a hard credit pull. The financing company focuses on the creditworthiness of your customers rather than your business credit.

How it works: The financing company advances up to 80% (sometimes more) of qualifying outstanding invoices. When your customer pays, you receive the remaining balance minus fees.

What to know:

• Approval depends on your client’s ability to pay, not your credit score
• Personal guarantees aren’t typically required
• Depending on the arrangement, you may not be liable for uncollectible invoices
• Fees often range from 1–10% of the invoice value

Popular with: B2B businesses with reliable customers with payment terms of 30 to 90 days.

Vendor financing

Vendor financing (also called trade credit) comes directly from your suppliers. Most vendors don't require a hard credit pull, especially for established business relationships. Some may check business credit reports.

How it works: Vendors or suppliers extend short-term credit for products you purchase from them. Net-15 or net-30 terms are common, giving your business 15 or 30 days from the invoice date to pay without interest.

What to know:

• You may not need a personal or business credit check (depends on the vendor)
• A personal guarantee is not often required
• Starting with smaller orders and paying on time may help build larger credit lines
• On-time payments may be reported to business credit bureaus

Popular with: Business owners looking to manage cash flow while building strong supplier relationships and business credit.

Microloans

Microloans are smaller loans from microlenders, including nonprofits, that may work with borrowers who have less than perfect credit, or thin files. These lenders may focus on your business potential rather than credit history alone.

How it works: Microlenders offer loans typically ranging from $500 to $50,000. Some programs specifically support underserved communities or certain business types.

What to know:

• Some microlenders may still require a hard credit pull, so ask upfront
• Many offer business support and training along with funding
• Interest rates vary but are generally more favorable than business cash advances
• Application requirements are often more flexible than traditional banks

Popular with: Startups, businesses in underserved communities, or those needing smaller amounts of capital with support.

Small business grants

Small business grants provide funding that does not have to be paid back. Credit checks are rare. Government agencies, corporations, and foundations may offer grants to support specific business types or communities.

How it works: You apply for grants that match your business profile. Grants often target specific industries, demographics, or business stages.

What to know:

• No credit check typically required
• Highly competitive application process
• May have specific use requirements for the funds
• Potentially time-consuming application process

Popular with: Businesses that meet specific grant criteria and have time to invest in detailed applications.

Building your credit while using these options opens up more favorable loan options with better rates and terms over time. Learn how to establish business credit to improve your financing choices.

How can I start a business with no money and bad credit?

Starting a business with no money and bad credit can be challenging, but not necessarily impossible. Here are practical strategies to launch your business when traditional funding isn't available:

Bootstrap the business. Assess what skills, resources, and assets you already have. Can you provide services or products using your existing talents? Start small, minimize expenses, and reinvest profits back into the business. This approach keeps you in control and avoids debt.

Use a lean business model. Focus on providing value to customers with minimal upfront costs. Use free or low-cost tools, work from home, and keep overhead expenses minimal. Test your concept before investing significant resources.

Validate your business idea first. Conduct market research and get feedback from potential customers before investing resources. This helps you refine your concept and ensures there's demand for your product or service. Talk to potential customers directly.

Offer services initially. If you have skills like consulting, freelance writing, graphic design, or social media management, consider starting a service-based business. These businesses often require little initial capital since you're selling your expertise.

Form strategic partnerships. Partner with individuals or businesses that complement your offerings. Collaboration helps you pool resources, share costs, and reach a wider audience. Look for partners whose strengths offset your weaknesses.

Try crowdfunding. Platforms like Kickstarter, Indiegogo, and GoFundMe let you raise funds from backers who believe in your idea. In exchange for support, offer rewards or early access to your products. This also validates market interest.

Apply for grants and competitions. Research grants, contests, and business competitions that offer funding to entrepreneurs. Many organizations and institutions support innovative business ideas. Niche grants may have less competition.

Explore microloans and online lenders. Look into microloan programs or online lenders that work with lower credit scores. These loans often have smaller amounts and more flexible eligibility criteria. Some may not require a hard credit pull, but ask first.

Tap into personal savings and assets strategically. If you have personal savings, consider using a portion to fund your business. You might also sell unused assets like electronics, furniture, or collectibles to generate startup funds. Only invest what you can afford to lose.

Keep a side job while building. Maintain a part-time job or side gig while building your business. This provides steady income and supports your living expenses while you grow your revenue. Many successful businesses started this way.

Approach friends and family professionally. Family members and friends who believe in your idea might be willing to invest or lend money. Formalize any agreements with written terms and treat these arrangements professionally to protect relationships.

Research government programs. Some government agencies offer support to small businesses, including those with limited resources. Look into local and federal programs like Small Business Development Centers (SBDCs) that provide free counseling and resources.

Starting a business with no money and bad credit requires dedication, resourcefulness, and perseverance. Be willing to adapt and learn, and seek guidance from mentors and other entrepreneurs who've faced similar challenges. Your constraints can force creative solutions that make your business stronger.

Do I need collateral to get a business loan?

Collateral is an asset or property you pledge to a lender as security. If you can't repay the loan, the lender can seize the collateral to recoup losses.

Whether you need collateral for business loans depends on the type of financing, the lender's requirements, and your financial situation. 

The requirement for collateral varies by loan type:

Secured loans are backed by collateral. Examples include many small business loans, SBA loans, and commercial real estate loans. The collateral might be business assets like equipment or inventory, or personal assets like your home.

Unsecured loans don't require collateral. Instead, lenders rely more heavily on your creditworthiness, business financials, and other factors. Examples include some equipment financing, merchant cash advances, invoice factoring, business credit cards, and short-term loans.

If you have bad credit or limited business history, lenders may likely require collateral as a way to reduce their risk. Most SBA loans will require collateral if available. 

Loan providers that don't require collateral may require a personal guarantee (PG) instead. When you sign a PG you agree that the lender may try to pursue you personally for payment if your business can’t pay back the loan. 

What's the best place to find a business loan?

If you need very fast funding, look for online lenders that provide a fully digital application and funding within a few business days. Many of these lenders offer a soft credit check for the initial loan screening but there may be a hard credit check if you decide to proceed with the loan. Be sure to ask. 

If you're aiming for the lowest rates, consider loans from traditional banks or SBA loans. These typically require strong credit with personal and/or business credit checks, and more documentation, but offer competitive terms.

Nav can help you compare financing options by showing offers matched to your business data.

Strategies for building business credit without hard inquiries

Building business credit may help your business access better financing options over time. Here's how to strengthen your credit profile:

Establish tradelines that report. Work with vendors and suppliers that report to business credit bureaus like Experian (Business), and Equifax (Business). Net-30 accounts that report to business credit can be a good place to start.  

Nav Prime offers a tradeline that submits to major business credit bureaus. 

Pay all bills early or on time. Your payment history is the single most important factor in business credit scores. Paying before the due date can boost your scores even more with some scoring models. Set up reminders or automatic payments to avoid missed deadlines.

Consider business credit cards that report. Some business credit cards report to business credit bureaus in addition to personal credit bureaus. 

Compare small business credit cards that may help build business credit here.

Monitor your business credit reports regularly. Check your business credit reports from Dun & Bradstreet (D&B), Experian, and Equifax to ensure accuracy. Dispute any errors you find. With Nav, you can monitor your business credit scores and reports from multiple bureaus in one place.

Start small and scale up. Begin with accounts that are easier to get approved for. As you build a positive payment history, your business may qualify for larger amounts and better terms.

Get Nav’s free guide to establish business credit here. 

Key takeaways

Whether you're just starting out or rebuilding your credit, multiple paths exist to fund your business growth. 

It’s possible to get business financing while avoiding a hard credit pull. 

But don’t automatically rule out other options. In most cases, the impact of a single inquiry is small and fairly temporary, and a credit check may lead to better financing options. 

Use these alternative financing options when you need them, but continue to build your personal and business credit to help you qualify for financing options where that is required. This strategy gives you access to capital now while opening doors to better financing options in the future.

Frequently asked questions

Can I get a business loan with a 500 credit score?

Yes, but your options will be limited and likely more expensive. A 500 credit score is considered poor credit. Traditional lenders and banks typically won't approve loans at this score level.

Your best options with a 500 credit score are no credit check business loans that focus on factors other than personal credit such as merchant cash advances or invoice financing

While alternatives provide access to capital, expect higher fees and less favorable terms than you'd get with better credit. Use this time to build your business credit. As your credit improves, you'll unlock better financing options with lower costs.

How long does it take for a hard credit pull to stop affecting my credit score?

Hard credit pulls typically stay on your credit report for about two years, but their impact on your score diminishes much sooner. Most of the negative effect fades within 3 to 6 months.

The initial impact is usually small — a single hard inquiry will often lower your score by just a few points. If you have a strong credit history, the effect is even less noticeable. However, multiple hard pulls in a short period can lower credit scores significantly. 

After about 12 months, inquiries typically have minimal impact on your score, even though it remains visible on your report. This is why spacing out credit applications and using no-hard-pull options when possible makes sense if you are working to build or rebuild your credit.

Can I negotiate with lenders to do a soft pull instead?

In most cases, no. Most lenders follow standard credit check procedures, but you can ask if they offer prequalification with a soft pull.

Once you submit a formal application for credit, lenders may need to perform a hard pull to make a lending decision. This is standard practice across the industry.

However, you can ask about prequalification options. Many small business lenders offer a prequalification option that uses a soft credit check initially. This lets you shop around without damaging your credit. Only submit formal applications to lenders where you're likely to be approved based on prequalification.

A better strategy is to specifically seek out financing options that don't require hard pulls by design. Business cash advances, invoice financing, and many vendor credit arrangements don't need to check your credit at all because they evaluate other factors like cash flow or customer creditworthiness.

Are there specific industries that have better access to no-hard-pull financing options?

Yes. Businesses with consistent cash flow and regular transactions typically have easier access to financing that doesn’t check credit.

Best positioned industries:

• Retail stores, restaurants and food service businesses (merchant cash advances)
• B2B service companies with invoicing (invoice financing)
• Wholesale and distribution businesses (vendor financing and invoice financing)
• E-commerce businesses with regular online transactions (business cash advances)

These industries can easily demonstrate revenue patterns without relying on credit scores. A restaurant processing $50,000 monthly in credit card sales, for example, may qualify for a cash advance based purely on those transactions.

Industries with irregular income or seasonal businesses may find it harder to access no-hard-pull options since these financing types rely heavily on consistent cash flow. In those cases, building vendor relationships for trade credit or exploring microloans and grants may work better.

Can I get preapproved for business financing without triggering a hard credit pull?

Yes, many lenders offer prequalification or preapproval using only soft credit pulls. This can help you learn what you might qualify for without affecting your credit score.

Prequalification typically requires basic information about your business, such as revenue, time in business, and general credit range. The lender provides an estimate of loan amounts and terms you might receive. This is non-binding and involves a soft credit check.

However, understand the difference: prequalification is not the same as final approval. When you formally apply, most traditional lenders will still need a hard credit check to make a final decision. The prequalification simply helps you shop smarter and avoid applying to lenders unlikely to approve you.

What happens if I apply for multiple no-hard-pull loans at the same time?

Applying for multiple no-hard-pull financing options simultaneously won't hurt your credit score since these lenders don't check your credit. However, you should still proceed carefully.

Potential issues to consider:

• Taking on too much financing at once can strain your cash flow when repayments begin.
• Some lenders include clauses preventing you from taking additional financing during the loan term.
• Multiple funding sources can become difficult to manage and track.
• Overlapping repayment schedules might create cash flow crunches.

Can I use business financing without a hard pull to improve my credit score over time?

It depends on whether the lender reports your payment history to business credit bureaus. Many no-hard-pull options don't report to credit bureaus, which means they won't help build your credit.

Options that may help build credit:

• Vendor financing from suppliers who report to business credit bureaus such as Experian, or Equifax.
• Some invoice financing companies report payment history.
• Certain online lenders report to business credit bureaus even without requiring a hard pull initially.

Options that typically don't build credit:

• Most business cash advances and merchant cash advances.
• Many short-term online lenders.
• Peer-to-peer lending platforms.

Ask lenders directly: "Do you report payment history to business credit bureaus?" If building credit is a priority, choose options that report, even if they have slightly higher costs. The long-term benefit of improved credit scores can lead to better financing options down the road.