Can you get a business loan with no credit check?

It is still possible to get funding with limited business credit history

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Small business owners often need loans to fuel growth, manage cash flow or invest in essential upgrades. However, accessing funding becomes a significant hurdle if you have poor or no credit.

Traditional lenders typically view a low credit score as a high risk, leading to loan rejections or unaffordable interest rates. This scenario creates a dilemma for small business owners — they need funds to improve their business and credit but struggle to secure the necessary financing.

Key insights

  • Traditional lenders usually require good personal and business credit to qualify for a loan, but alternative options exist that may not mandate a credit check.
  • If no-credit-check loans are the only feasible choice, be prepared for higher interest rates and fees since the lender takes on greater risk.
  • Even with bad credit, you can improve your chances of approval with a detailed business plan, proof of cash flow, collateral or a co-signer.

Why lenders require a credit check

Lenders use credit checks to gauge the risk involved in lending you money. Your credit history provides a record of your past financial behaviors, including how you've managed loans, credit card payments and other debts. This information helps lenders predict your future financial behavior and decide whether to approve your loan request.

“Most organizations will review both the business’s credit and the owner’s personal credit history,” said Dean Kaplan, president of The Kaplan Group. “If you have a good personal credit score, that is helpful. A bad one indicates that you may not know how to manage your finances and that will cause great skepticism when considering your business loan request.”

If a lender doesn't require a credit check, be prepared for certain trade-offs. These loans often come with higher interest rates and fees because the lender is taking on more risk by not assessing your credit history. They offset this risk by charging more.

» MORE: How to check your credit score

Loan options that might not require a credit check

Below are some business loan options that are less likely to require a credit check.

Invoice factoring

Invoice factoring involves selling your outstanding invoices to a factoring company at a discount. This provides immediate cash flow.

Invoice factoring may feel like an ideal business loan option if you have bad credit. But just know that you may pay between 2% and 4.5% each month for invoice factoring, which can be expensive over time.

Minimum criteria: In many cases, having a consistent stream of invoices from creditworthy customers is the biggest eligibility requirement.

Merchant cash advances

A merchant cash advance (MCA) provides an upfront cash payment in exchange for a percentage of future credit and debit card sales. 

MCAs almost sound too good to be true, but Kaplan gave this warning: “Funding options like merchant cash advances have implied interest rates from 50% to 150%. Very few business investments can justify paying this much for capital.”

Minimum criteria: Some lenders don't check credit scores and only require three months in business. Others require a minimum credit score of 500, at least three to six months in business and at least $10,000 to $15,000 in monthly revenue.

Equipment loans

Businesses use equipment loans to finance new machinery. These loans often have lower credit requirements and lower interest rates than other business loans because the equipment you’re financing serves as collateral if you can’t pay it back. 

Minimum criteria: Lenders like Lendio will approve equipment loans with a minimum 520 credit score if you have at least $50,000 in annual revenue. Others, like Credibly, have no minimum credit score or revenue requirement.

Lines of credit

A business line of credit is a revolving loan that allows you to borrow up to an approved limit as needed. You’re charged interest only on balances used rather than the full line amount.

Minimum criteria: Most lenders want you to have a minimum credit score of 600 for a line of credit. But some, like SmartBiz, have no set minimum requirements other than being in business for at least six months.

Payment processor loan

If you use a payment processing platform like PayPal or Stripe for your business sales, you may see offers to get business loans through that platform. This is known as a payment processor loan. 

Minimum criteria: Usually, proof of consistent sales through the platform is enough to qualify for funding. There are often no credit checks.

How to get a business loan with bad credit

“Bad credit” is generally a score below 669. If your FICO credit score falls within this range, here are some steps you can take to increase your chances of getting a business loan

Create a detailed business plan

A well-crafted business plan should clearly outline your business model, market analysis, revenue projections and a solid strategy for growth. This shows lenders that you have a clear roadmap to success.

Have proof of steady cash flow

Lenders want confirmation that you can repay your business loan. Provide detailed financial statements and cash flow projections to demonstrate your business's financial stability. Evidence of consistent income can sometimes offset the concerns of a low credit score.

Offer collateral

“Banks are highly unlikely to give a loan to a business that has bad credit or no credit unless there is a secondary source of collateral,” said Kaplan. Offering assets as collateral can make lenders more inclined to approve your loan. Collateral reduces the lender's risk as it can be seized if the loan is not repaid.

If you, as the business owner, have a significant net worth, a personal guarantee could also work. It states that if your business is unable to repay the loan, your lender has the right to go after your personal assets instead.

Seek a co-signer

A co-signer with a strong credit profile can improve your loan application. Their creditworthiness can compensate for your poor credit and increase the likelihood of approval.

Explore alternatives to no-credit-check business loans

Traditional banks are strict about credit scores. Alternative lenders or online lending platforms often have more flexible criteria and may be more willing to consider your application despite a low credit score.

Kaplan says that if you have no credit or low credit, you could also look into getting funded through crowdfunding and peer-to-peer lending platforms or microloans.

“These are typically far less expensive than many alternative funding options,” Kaplan said. “Grants and subsidies from nonprofit or government organizations are available if your business supports the mission for these funding activities.” 

» COMPARE: Best business loan companies

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What is a soft credit check?

A soft credit check is a request for your credit history that does not impact your credit score. Some business loan lenders use soft credit checks to get a preliminary view of your creditworthiness without having to add a hard inquiry to your credit report.

What is the minimum credit score for a business loan?

Minimum credit scores vary across business loan types. Typically, traditional lenders like banks might require a credit score of 600 to 680 or higher. But some alternative lenders may offer loans to those with lower scores, sometimes as low as 500.

Will getting a business loan affect my personal credit?

Yes, getting a business loan can affect your personal credit, especially if you provide a personal guarantee for the loan or if your business's credit is linked to your personal credit. If you miss payments or default on the loan, it can drag down your personal credit score. On-time payments could help improve it.

Bottom line

For small business owners struggling to access funding due to poor credit, alternative loans and finance options exist that don't always demand a credit check. Just be aware that any loan taken without a credit review is likely to come with higher interest rates or fees to offset the additional risk.

Article sources
ConsumerAffairs writers primarily rely on government data, industry experts and original research from other reputable publications to inform their work. Specific sources for this article include:
  1., “Credit Scores: How Low Can You Go?” Accessed Dec. 17, 2023.
  2. Consumer Financial Protection Bureau, “What’s a credit inquiry?” Accessed Dec. 17, 2023.
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