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NGExpert financial copywriter
Page written by Chris Godfrey. Last reviewed on October 29, 2024. Next review due October 1, 2025.
For business owners with bad credit, it can be extremely tough to borrow money – but that doesn’t mean it’s impossible. No credit check business loans forgo the usual credit reviews and focus on other factors to determine loan approval.
No credit check loans are a type of business financing where the lender does not check your personal or business credit score when reviewing your loan application.
No check business loans may be ideal for small business owners with poor credit, but securing a loan without undergoing a credit check can be difficult. Most lenders will check your credit when you apply, so finding lenders who are happy to forgo this basic due diligence could take a lot of time and research. Also, be aware that no credit check business loans almost always come with higher costs, shorter loan terms and lower loan amounts than standard business financing.
No credit check business loans may be a good financing solution for business owners who:
The term ‘bad credit’ refers to a history of not paying bills or loan repayments on time and the increased likelihood that the borrower will fail to make timely payments in the future. In practice, bad credit really means a poor credit score – the calculation that lenders use to determine the default risk of any borrower. Lenders may use your personal FICO score or your business credit score when considering your loan application. Some may use both. A FICO score of 300 to 579 is considered bad credit, 580 to 669 is fair credit and 670 and above is good credit. In some cases, lenders may deny loan applications for bad and fair FICO scores, forcing even moderate risk borrowers to seek loans from bad credit specialists.
Some lenders (especially for SBA loans) will place more importance on business credit scores than FICO. Business credit scores vary depending on the model being used, although a range of 1 to 100 is most common. A good business credit scores is +80. Scores below 50 are considered bad credit.
A business credit score is an indicator of the financial strength of your organization and its ability to pay its bills. This is an important metric. Lenders will often consider your business credit score when deciding to lend you funds. Your score will also impact how much you pay for borrowing the cash. The better your score, the better your chances of getting a loan at a competitive interest rate.
Yes, although the pool of lenders who offer this kind of financing is limited, so you’ll need to shop around to find a deal. Collateral is usually required.
Note that some lenders may be willing to provide you with a loan based on a ‘soft credit check’. This is a review of your personal or business credit (or both) that does not leave a hard search statistic on your credit report. Alternatively, you could consider loans such as a merchant cash advance or invoice financing that use your sales receipts and billings as security for a loan. These types of borrowing are often available without a hard credit check, although they are typically more costly than standard business loans.
Popular no-credit check business loans include:
Secured business loans are typically easier for borrowers with bad or no credit to obtain and they may be available without a credit check. You provide hard assets, such as real estate, plant and machinery, or inventory as security for the loan. The lender holds a lien on the assets until the loan is paid back, then full ownership returns to you.
It may be possible to secure a business credit card to fund your organization without a credit check – although the interest rates and fees you pay may be very high. The application process for these cards is usually fast, streamlined and does away with the need for piles of paperwork – in many cases you won’t even need a formal business structure to apply.
Equipment loans are ‘self-collateralizing’ – they use the asset you’re financing as security, similar to a car loan or a residential mortgage. You use the equipment as you pay for it while the lender maintains a lien on the machinery until the loan is repaid. Once the loan is paid off, the lien is dissolved and you own the equipment outright.
Also known as account receivables financing, this type of loan allows you to borrow against the value of your unpaid invoices and is best for B2B organizations. The lender will usually provide up to 95% of the invoice value within a few days or even hours of the bill being raised. Your invoices act as security for the loan, no other collateral is required.
A merchant cash advance may be a good option for businesses that accept customer payments by credit and debit card. You borrow against the value of your card sales so your credit score is less important . As your card sales increase, your borrowing limit goes up. Pay the loan back with a fixed percentage of your card sales on a daily, weekly or monthly basis. Your sales act as security for the loan, no other collateral is required.
Revenue-based financing functions like a merchant cash advance but with higher borrowing limits. Based on the size and regularity of your total revenues, (not just your credit card sales), you receive a lump sum and pay it back over a short-term schedule, sometimes by small deductions from daily sales. This type of loan can usually be secured quickly as qualification rules are less intensive and credit scores are not so critical. No added collateral required.
Obtaining a no credit check business loan can be challenging. Not only are these types of loan offered by fewer lenders, the terms and conditions of no credit check loans can vary significantly. Shopping around before settling on a deal is therefore essential. You can do this by approaching banks, credit unions and online lenders one by one over days, weeks, or even months, or you can use the services of a loan marketplace that can quickly introduce you to a choice of financing offers from a range of lenders. Some marketplace platforms can also give you advice and help you with the application process. This can be especially useful for borrowers who have never taken out a business loan before.
As with all forms of financing, there are advantages and disadvantages with no credit check business loans:
Pros
Cons
Possibly, although few lenders will provide a start-up loan without a basic credit check and if you can find such a loan, the costs will usually be high. Keep in mind that start-up loans are some of the most difficult to obtain and at the very least, legitimate lenders who provide this sort of financing will conduct a soft business and personal credit check. Additionally, no reputable lender will guarantee your approval for a loan without first reviewing your financial status.
If you can’t qualify for a standard business financing and you don’t want to pursue a no credit check business loan there may be other ways to raise the funds you need:
Business grants can be a good option for small business owners. Credit checks are usually not required, and, unlike business loans, you don’t need to repay the money. However, the downside is that it can be very tough to secure a grant. They are often restricted to specific locations, industries or causes, making it difficult to qualify.
Five places to find small business grants:
Specialized business grants:
Available via various online platforms, crowdfunding can bring in large sums if your presentation hits the right spot. Although it may be tough to raise big money in small donations from hundreds of donors, you do not need to repay the money if you spend it where you said you would. An eye-catching idea and a powerful pitch is essential to succeed with this funding option.
Many small business owners borrow money from family and friends, especially when they’re trying to get a new venture off the ground. However, using funds from loved ones can often be a source of contention if the ground rules are not clear from the start. If you have access to this type of financing, make sure your funders know if they are providing a loan, a gift or an investment from the start. If there are plans to pay the money back, put this down in writing with a clear repayment schedule – including a plan of action if things do not turn out as expected and you cannot pay the funds back on time, or at all.
No matter if you’re seeking your first loan or you’re a seasoned borrower, working with business finance experts can make all the difference when applying for funding. Contact Swoop to discuss your borrowing needs, get help with your application and to compare high-quality business loans that do not require a credit check from a choice of lenders. Give your organization the financial boost it deserves. Register with Swoop today.
Written by
Chris is a freelance copywriter and content creator. He has been active in the marketing, advertising, and publishing industries for more than twenty-five years. Writing for Wells Fargo Bank, Visa, Experian, Ebay, Flywire, insurers and pension funds, his words have appeared online and in print to inform, entertain and explain the complex world of US consumer and business finance.
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