Most traditional business lenders will take a borrower’s credit score into account when assessing their ability to pay back the loan. There are, however, a few funding alternatives that do not require a credit check and consider other factors like revenue and cash flow.
PayPal Working Capital and Square Capital are two examples of these alternative loans.
Benefits
If your business needs financing and you have a bad credit score, finding a loan option that doesn’t perform a credit check can be a good choice. However, loans without a credit check often come with steep interest rates, so be sure to weigh the pros and cons carefully before making any decisions.
In addition, you should be aware that some business funding providers conduct a soft credit inquiry to prequalify applicants, which doesn’t impact your credit score. Some of these lenders may also require a personal guarantee or collateral in case the borrower defaults on the loan.
Unlike traditional business loans, which analyze applicants using the five C’s of credit — capital, capacity, character, current liabilities and conditions — no-credit-check business loans evaluate risk based on other criteria, such as the ability to repay the loan amount and the financial health of the applicant’s business. Some alternative lenders specialize in this type of financing and provide small-business owners with flexible terms, fast approval and competitive rates.
Some payment processing and credit card companies also offer financing options that don’t require a credit check. For example, mobile payment company Square offers small-business financing that is based on a percentage of an applicant’s future credit card sales. Other financing options include debt crowdfunding, where investors make donations to help small businesses, and the Kiva microloan program, which provides loans to entrepreneurs in developing countries.
Drawbacks
The few business loan options that don’t require a credit check usually carry higher interest rates than traditional loans. They may also have shorter terms, so you’ll pay more over the life of the loan.
These types of loans are best for established businesses that already have sales and invoices. They typically don’t require personal collateral and are backed by the performance of past business transactions. One example is Square Capital, which gives small businesses a line of credit based on their transaction history with the mobile payment company.
Other options include a line of credit from a business-focused bank or a nontraditional lender, such as Kiva. These lenders may do a soft credit inquiry, which doesn’t impact your score, to determine whether you qualify for funding. Then, if you do, they will perform a hard credit pull, which can affect your score.
Other ways to get business financing without a credit check include grants from local governments and nonprofit organizations, crowdfunding, and angel investors. You can also consider taking on a partner or reworking your current business plan to improve your chances of getting a traditional business loan with better rates and fees. It’s important to weigh the benefits and drawbacks of each type of financing, so you can decide what’s best for your business. Making your payments on time can help build your business and personal credit profiles, which may make it easier to secure a loan in the future.
Alternatives
While it may be difficult to find a business loan without a credit check, there are financing options that may provide the funds you need. Alternative funding providers, such as invoice factoring and merchant cash advances, place less emphasis on your business credit history and instead focus on the value of your receivables and the creditworthiness of your customers. They are often a better option than traditional business loans and offer a faster approval process. However, they also tend to have higher interest rates and shorter repayment terms.
You can also try to secure a payday loan, which requires no credit checks and is usually paid back with your next paycheck. However, this type of financing is often more expensive than other types of business loans and should only be used as a last resort.
Some payment processing and credit card companies are also getting into the lending space and offering business financing. One such provider, PayPal Working Capital, offers small business loans that do not require a credit check or minimum credit score. However, this type of financing is only available to businesses that use Square’s point-of-sale system and typically has a maximum loan amount and a fixed fee for repayment. Other lending platforms, such as Kiva, offer microloans to entrepreneurs with poor or no credit, which are repaid over a short period of time.
Lenders
Getting business financing with bad credit or no credit can be difficult, as most lenders rely on a borrower’s credit history to ensure they will pay back the loan. However, there are a few lending options available to those with lower or no credit scores who still want to fund their business. These lenders focus on other factors to evaluate applicants’ creditworthiness and offer a variety of lending solutions, from lines of credit to ACH loans.
When it comes to traditional business loans, most lenders will review a borrower’s personal credit report and score as well as their company’s business credit profile when making a decision. They will look at your repayment history, mix of credit types, and how much of your company’s available credit you use to assess whether or not you will be able to repay the loan amount.
Some lenders will consider your application without a credit check if you are already a customer of the lender’s products or services. These include payment processing companies, ecommerce platforms, and credit card providers. These options are usually more expensive than conventional business loans and require you to have an existing account with the lender before applying. They can also be difficult to understand and utilize, so it is important for borrowers to weigh the pros and cons before selecting these types of funding alternatives.no credit check loans for business
