Trying to get a business loan for your startup with poor credit and no money may seem impossible, but it isn’t. Although many lenders want to see good credit, strong revenues and solid cash flow before considering a loan request, some specialist business lenders and alternative types of financing can give you the funds you need even if your credit is less than stellar and you have no cash to hand.
Securing a small business loan can be challenging for many organizations, but for business owners with bad credit, it can be extremely tough. No credit check business loans may provide a solution to this problem, although this type of financing typically comes with higher costs, shorter terms and lower sums available.
No credit check loans are usually provided by online and alternative providers instead of traditional lenders such as banks and credit unions. With this type of financing the lender does not check your personal or business credit score when reviewing your loan application. However, in reality, most lenders will check your credit score when you apply for a loan, although some may be willing to provide you with financing based on a ‘soft credit check’. This is a review of your personal or business credit score that does not leave a hard search statistic on your credit report. Alternatively, loans that use your sales receipts, invoices or other assets as collateral may also be available without a credit check.
No credit check business loans may be a good financing solution for business owners or startup entrepreneurs who:
Interest rates, fees and terms and conditions for no credit check business loans can vary significantly, so it is important that you do your homework and review all the options before settling on a deal.
Here’s a rundown of the best business loans without a hard credit check:
Secured business loans are easier for borrowers with bad or no credit to obtain and they may be available without a hard credit check. You provide assets, such as real estate, machinery, or inventory as collateral 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 hard 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 piles of paperwork – in many cases you won’t even need a formal business structure to apply. Business credit cards are also great for re-building your credit if you pay off the balance every month. No added collateral is usually required.
Equipment loans use the asset you’re financing as security, similar to a car loan or a residential mortgage, so no added collateral is required. By machinery, furniture, technology, etc. Once the loan is approved, the lender sends the funds to the equipment vendor, who then delivers the equipment to you. Use the equipment as you pay for it while the lender maintains a lien on the title to the machinery until the loan is repaid.
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. Instead of waiting 30, 60, 90 days or more to get paid, 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.
Available for businesses that accept customer payments by credit and debit card. You borrow against the value of your card sales. 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.
To get a startup business loan with no cash or revenues, you’ll need to show that you have the ability to repay the debt. Here are some tips to help you get approved:
Even with soft-check or no credit check business loans your credit score is still important. If you don’t have strong personal or business credit scores, you should re-build them before applying for financing. However, be aware that only time and good financial management can turn a bad score into a good one. Start the process by following these steps:
Every lender will have their own financing criteria. Some lenders may need to see a steady cash flow and solid positive balances in your business bank account, but others may be more lenient about the need for cash on hand and strong revenues. Review the requirements of each lender and make sure you can meet their needs before applying.
If you can provide collateral – real estate, vehicles, machinery, etc. – it will usually be easier to get a business loan when you have no cash or revenues. Once again, you should review each lender’s requirements with regards to collateral – some will consider most types of asset, while others may only work with assets that are fully paid for and owned by the business.
A cosigner is a person you trust and who has good credit and assets they are willing to offer as collateral. They agree to make the payments on your business loan if you or your business cannot. Essentially, the cosigner is a fail-safe for the lender. If you don’t pay, they will. This can give added comfort to the lender, and in the right circumstances, may improve your chances of loan approval.
A cosigner can be anyone you know – friends, family, business associates etc. They will need good credit and sufficient assets to cover the value of your business loan. You should choose your cosigner well. The cosigner should be someone you trust and who trusts you, because asking them to put their finances, assets and credit on the line is no small thing. Keep in mind that if things do not go according to plan and they end up paying back your loan it could have a detrimental impact on your relationship with them.
Taking on a business loan that can’t repay won’t help you or your new business. Review your cash flow and revenue projections before applying for a loan. Is there room in your budget to make the necessary payment instalments? Also be aware that although many business loans require monthly repayments, some startup loans will demand weekly or even daily instalments. Will your cash flow be able to handle these smaller, but more frequent payments?
As well as business loans, entrepreneurs may be able to obtain the funds they need to launch their new venture from sources such as these:
If you’re seeking outside investment, there are networks of venture capitalists and angel investors readily available online. Some are solely focused on supporting startups and new businesses.
Bringing in external investment can give you the cash you need to get your idea off the ground, and it may also deliver a unique and extra set of skills and contacts that can help your organization grow even faster. However, be aware that investors will usually want a piece of the action in exchange for their money. This will mean you giving up a share of your ownership and may loosen your overall control of the business. Some investors may also want higher dividends or royalty payments as well as their share of equity. Also note that venture capitalists and angel investors can be very picky about the businesses they choose to back. You could spend many months pursuing one lead after another before you find the right match.
Business grants are another funding option for startups and young organizations. Unlike business loans, the major advantage of this type of financing is that you don’t need to repay the money. However, the downside is that can be very tough to secure a grant. They are often restricted to specific locations, industries or causes, making it more difficult to qualify.
Five places to find small business grants:
Available via various online platforms, crowdfunding can bring in large sums if your presentation hits the right spot. Although you will need to be creative to raise big money in small donations from hundreds or even thousands of donors, you do not need to repay the cash 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 are 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 opportunity, 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 startup loan or you’re a seasoned borrower, working with business finance experts can make all the difference when applying for your funding. Contact Swoop to discuss your borrowing needs, get help with your application and compare high-quality startup loans from a choice of lenders. Get your organization up and running even if your credit is less than stellar and you have no cash to hand. Register with Swoop today.
Swoop was amazing! I was looking for refinancing and they were straight onto finding me the best possible option. I would highly recommend them.
Owner, F45 Cambridge
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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