Some small business owners may want to explore their business financing options without having lenders pull their credit. It’s possible to find funding that doesn’t check your credit, but it will likely be expensive and have shorter terms and higher rates. In this article, we’ll look at a few options for funding that doesn’t check your credit.
Most traditional lenders use your personal credit score as a factor in their approval process, but there are some lenders that don’t. There are also some types of financing that don’t require a credit check or can forgive a low credit score.
One of the best alternatives is an SBA loan, which is a government-backed loan program that partially guarantees loans and sets strict eligibility criteria for lenders. However, to qualify for an SBA loan, you’ll typically need a very high personal credit score and have at least two years of business operating history. SBA lenders typically set a minimum personal credit score of 650, and many require a score of 700+.
Another alternative is a lender that specializes in financing for small businesses with bad credit. These lenders can be more flexible than traditional lenders, and they can provide a line of credit based on your average monthly sales or other financials. However, these lenders typically have higher interest rates and fees than traditional business loans.
Other financing alternatives that don’t check your credit include merchant cash advances, payment processor loans and invoice factoring. These loans can be expensive, but they are often more forgiving of a low credit score than traditional business loans. Merchant cash advance lenders often have a low minimum credit score requirement, and repayment comes from a percentage of your daily sales. Payment processor loan providers, such as Square Loans and PayPal Working Capital, offer financing based on your previous sales and customer data, and some also have low credit requirements. Invoice factoring, or accounts receivable financing, allows you to convert your unpaid invoices into working capital by partnering with a third-party financial services company. Invoice factoring companies usually don’t check your credit and focus on the credit of your customers, which can be a great alternative to traditional business loans for bad credit.
If you’re unable to qualify for financing with these or other options, it’s important to work on improving your credit score before trying again. If your credit is too poor to qualify for a business loan, there are other ways to get funding for your small business, including crowdfunding, peer-to-peer lending and grants. You can also try applying for a personal credit card with an extended repayment plan, which can help you build your credit over time while managing expenses. If you’re unable to obtain financing, it may be time to consider selling your business. Learn more about the process here. no credit check loans for business