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What to know about no-credit-check business loans
Invoice factoring, merchant cash advances and more options that might not require a credit check.
When your credit score has taken a hit, your business loan options are limited — but you may still qualify. However, they are often more expensive than typical business loans.
What's a no-credit-check business loan?
A no-credit-check business loan is a type of business financing where the lender doesn't consider your credit score during the application process. It's typically short-term financing and can cost more than other options out there.
Often, no-credit-check business loans don't work like your typical unsecured term loan. Most require some kind of collateral or a personal guarantee. Others might take different risk factors into account, like your clients' credit scores.
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Types of business financing that might not need a credit check
Some lenders don't advertise loans with no credit checks — sometimes it's just the nature of that type of financing. If you don't want lenders to consider your credit score, start by looking into the following options.
Invoice factoring is a cashflow solution for businesses that rely on invoices from other businesses or government agencies. Here, your business sells its invoices due within the next 30 to 90 days at a discount to a factoring company.
Factoring companies don't check business owners' credit scores, though they might consider your clients'. But not always. That's because many companies require your business to repurchase any invoices that your clients fail to pay, making it even less risky for them.
Invoice financing is similar to invoice factoring but has some key differences. Instead of an advance on your unpaid invoices, it's a short-term loan based on the value of your invoices. Your company keeps control of collecting the invoices and pays off the loan as they're filled. While invoice factoring charges a fee, invoice financing charges interest.
Some invoice financing lenders like Fundbox consider your credit score when you apply. But even those that do, typically don't have minimum credit requirements, or give credit scores much weight.
Merchant cash advances
Merchant cash advances are for businesses that rely on credit card purchases — like retailers or restaurants. It's an advance on your business's future revenue, which you pay back plus a fee with a percentage of your daily sales. Since it's based on revenue, most lenders typically care more about your business's sales record than your personal credit score and don't run a check.
Equipment loans are term loans specifically designed to help your business purchase new equipment. It's a secured loan that uses the equipment as collateral.
While most equipment financing providers might do a credit check, many are willing to work with poor-credit borrowers. That's because secured loans are less of a risk to the lender than unsecured loans, especially if your loan amount is based on the value of your equipment.
Asset-based financing is a type of secured business loan that's backed by anything your business already owns worth money. For example, your business can use equipment, vehicles or real estate as collateral for an asset-based loan.
Since your loan is backed by collateral, asset-based financing providers are often open to working with all credit types. Some might even forego the credit check.
Microloans from a nonprofit
If your business serves an economically disadvantaged community, it could qualify for microloans or other types of financing from a local nonprofit. Nonprofits typically don't consider your personal credit history and if they do, most are willing to work with poor- or no-credit borrowers.
Microloans can be particularly useful to a small business that only needs a small amount of funds to get started or expand.
Rollover for Business Startups (ROBS)
ROBS is a type of financing that allows entrepreneurs to cover startup costs by using their retirement savings. It's a complicated process that involves taking advantage of a tax loophole, and it can get expensive if you decide to hire help. But since you're technically borrowing from yourself, there's no need for a credit check.
Crowdfunding platforms like Kickstarter and GoFundMe allow businesses to raise funds from fans, friends and family. It can be a great way to fund a new project, especially one that's easy to share on social media. Most platforms charge a percentage of the amount you raise as a fee, and some won't let you collect donations unless you reach your fundraising goal. But it doesn't consider your credit score when you sign up.
Investing some of your own money into your business is a surefire way to avoid credit checks. It can also look good when you're applying for a business loan down the line — many lenders like to see that you've taken a personal risk yourself. Investors also often like to see that you have some skin in the game.
Friends and family
When all else fails, ask your friends and family to help finance your business. You can draw up a contract yourself or use a service like Loanable to make your terms legally binding. Since they already know you and your financial history, your credit score most likely won't affect their decision.
Can I get a no-credit-check loan for my startup?
It's possible, but not likely. Most startup-friendly loans tend to rely on the business owner's credit to make up for the fact that your business doesn't have a long record of revenue.
Unless you have enough money in a retirement plan to fund a new business with a ROBS, you might have a hard time finding a legitimate lender that's willing to forego a credit check completely. That doesn't necessarily mean you need to have excellent credit to qualify for a startup loan — though it helps. Here's how startup funding works by credit score
- Very good credit: 740–850. You'll likely qualify for startup loans based on your credit score alone, or consider taking out a personal loan to fund your business. You don't need to worry about passing a credit check because you'll pass with flying colors.
- Good credit: 670–739. With good credit, you still have a wide range of options and will likely get approved for most startup and personal loans.
- Fair credit: 580–669. Your options are generally limited to alternative lenders and no-credit-check financing like crowdfunding and ROBS. You'll still make the cut for a handful of lenders that specialize in startup loans like Diamond Business Loans, however.
- Poor credit: 300–579. You might have better luck pitching to investors than getting a business loan. You could qualify for some short-term loans, but they'll likely come with high rates and fees. You can also look for a local nonprofit willing to offer financing to someone with a low credit rating.
Is a no-credit-check loan right for my business?
Even if you have a low credit score, a no-credit-check loan might not be the best financing option for your business. A lot of no-credit-check options are only available to specific types of businesses and are often more expensive than your traditional term loan. Consider your business type and your specific financing needs before looking for financing based on a credit check alone.
Your business could benefit if …
- You have poor credit. You might not qualify for a more competitive rate from a lender that runs a credit check.
- You want to apply for personal financing soon. Recent hard inquires don’t look good when you’re applying for a mortgage or other large personal loan.
- You’re new to the country. When you have no credit history, you won’t qualify for a loan that runs a credit check. Or, consider building your credit score with a credit builder loan or service, like those offered by Stilt.
Consider other options if …
- You have good credit. Even if you need funds fast, you can likely find a better loan with an online lender that offers next-day funding but does a credit pull.
- You need startup money. Startup financing tends to depend more on the owner’s credit rating than other types of business loans.
- You don’t want to put up collateral. One way to beat the high rates on no-credit-check loans is to put up collateral. If you don’t want to, your options are limited and expensive.
Watch out for no-credit-check business loan scams
Some no-credit-check loans might sound too good to be true and that’s because they often are. Watch out for these red flags:
- Guaranteed approval. No lender can guarantee that you and your business qualify before looking at your application.
- Upfront fees. Legitimate lenders typically don’t ask borrowers to pay a fee before they even apply.
- Fake accreditations. Stay away from lenders that advertise accreditations from the Better Business Bureau (BBB) or other trade organizations they aren’t members of.
No-credit-check business loans can be one of the more expensive business loan options out there. Unless you need emergency cash, look into other options to get the best deal your business is eligible for. Get started by visiting our guide to business loans.
Frequently asked questions
Can you get a business loan with bad credit?
You can, though your options are limited if your credit score is below 580. Consider looking into a secured business loan, which has a higher approval rate and offers more favorable rates and terms than you might otherwise be eligible for.
Can I get a car loan in my business's name?
You can, as long as you intend to use that car for mainly business-related purposes. Check out our vehicle financing guide for businesses to learn more about your options.
Do lenders consider my business credit score?
Some do, but most put more weight on your personal credit. That's because personal credit scores are more commonly used. Check out our page on business credit scores to find out how they work.
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