How Do I Get a Small Business Loan Without Credit History?
The good news is you can still get approved for a small business loan without credit history. There are several small business lenders that offer business loans with no credit check and are willing to take a chance on those with no credit history or limited credit.
In this post, we’ll explain how business owners with no credit history can navigate the application process and ultimately get approved for business funding.
What Are Business Loans with No Credit Check?
Business loans with no credit check are exactly what they sound like. If you apply for one, a business lender may approve you without a credit check. Due to this, business owners with poor personal credit or business credit often benefit from this option.
While traditional business loans will look at your credit, capital, character, capacity, and conditions (the 5 cs), business loans that don’t require a credit check are a bit different. Business lenders who offer them will look beyond your credit score to determine how likely you are to pay back the loan amount that you borrow.
Types of Business Loans with No Credit Check
Not all business loans with no credit check are created equal. In fact, there are a variety of business funding options that you may choose from including:
- Term Loans: Also known as an installment loan, a term loan is when a financing lender provides you with a lump sum of money upfront. You pay it back with interest via monthly payments over an agreed upon time frame or term. Borrowing amounts, interest rates, and terms vary significantly by lender.
- Lines of Credit: Business lines of credit are similar to business credit cards. If you move forward with this type of business loan, you’ll be able to withdraw as much or as little as you’d like up to a set credit limit. Therefore, you’ll pay back the amount you borrow plus interest.
- Equipment Loans: If you need to purchase equipment like a crane, oven, or fax machine for your business, equipment loans are ideal. This type of loan is specifically designed to help small business owners cover the cost of equipment. With an equipment loan, your equipment will serve as collateral. Therefore, if you default on your small business loan, the lender will seize it.
- Accounts Receivable Financing: Accounts receivable financing is when you receive a specific amount of money for your unpaid invoices. The lender will collect payment from your customers and pay you the remaining invoice amounts minus any fees they may charge.
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When Do Small Business Loans with No Credit Checks Make Sense
There are a few situations in which a no credit check business loan is a good funding option
If you don’t have the best credit history or own a startup business with no credit history, applying for a no credit check business loan could save you significant time and energy on getting rejected from other business lenders.
Also, if you have plans to apply for a mortgage, auto loan, or other types of business financing in the near future, a small business loan without a credit check can help you out. Here’s why: Too many inquiries on a credit report may take a toll on your score. This can lower your chances of getting approved for a traditional business loan with favorable terms.
Fortunately, most financing lenders conduct a soft credit pull during the prequalification process. The soft credit pull won’t affect your score and you can get an idea of what type of offer you may get approved for. A hard credit inquiry, which will impact your score will be performed later once you agree to take out the loan.
How Do I Get a Small Business Loan with No Credit Check
If you decide that a no credit check small business loan will be beneficial for your business, you must conduct extensive research.
While business loans that don’t require a credit check exist, they aren’t very popular. Since only some alternative lenders offer these products, you’ll need to shop around to find viable options.
Most business financing lenders will require you to provide a business plan so that they can learn about your business and how their funding may help.
In addition, they might also ask you to put up business collateral so that they can reduce their risk of lending you money. If you don’t repay your loan, the lender will repossess your collateral to cover the damages.
Keep in mind that if you do get approved for a no credit check business loan, you may have to pay a higher interest rate. A higher interest rate can cost you thousands of extra dollars on your working capital loan so it’s important to budget accordingly.
If you don’t need business funding right away, it may be in your best interest to build or improve your credit before applying for a traditional loan that requires a credit check. This way you may secure a loan with a lower interest rate and better terms. You’ll also open the doors to more financing options in the future.
Conclusion: Meet Your Business Goals with a No Credit Check Business Loan
A small business loan that doesn’t require a credit check can be a lifesaver if you need to increase your businesses cash flow but have bad credit or no credit. Many business owners struggle to make ends meet without additional financing, so it’s certainly worth considering.
However, it may also cost you a lot more money than if you were to go with a traditional business loan instead. Therefore, weigh the pros and cons of this type of financing and determine whether waiting for a business loan that involves a credit check is worth it.
Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author's alone, and have not been reviewed, approved, or otherwise endorsed by any of these entities.