When your credit score has taken a hit, your business loan options are limited. Luckily, there are several types of business financing that don’t require a credit check at all. However, these options can often be more expensive compared to your typical business loan and might not be right for every business.
What’s a no-credit-check business loan?
A no-credit-check business loan is a type of business financing where the lender doesn’t consider your credit score during the application process. It’s typically short-term financing and can cost more than other loan options.
Often, no-credit-check business loans don’t work like your typical unsecured term loan. Most require some kind of collateral or a personal guarantee. Others might take different risk factors into account, like your clients’ credit scores.
Types of business financing that might not need a credit check
Some lenders don’t advertise loans that specifically come with no credit checks — sometimes it’s just the nature of that type of financing. If you don’t want lenders to consider your credit score, start by looking into the following options.
Invoice factoring
Invoice factoring is a cash flow solution for businesses that rely on invoices from other businesses or government agencies. Here, your business sells its invoices due within the next 30-90 days at a discount to a factoring company.
Factoring companies don’t check business owners’ credit scores, though they might consider your clients’. But not always. That’s because many companies require your business to repurchase any invoices that your clients fail to pay, making it even less risky for them.
Invoice financing is similar to invoice factoring but has some key differences. Instead of an advance on your unpaid invoices, it’s a short-term loan based on the value of your invoices. Your company keeps control of collecting the invoices and pays off the loan as they’re filled. While invoice factoring charges a fee, invoice financing charges interest.
Some invoice financing lenders consider your credit score when you apply. But even those that do, typically don’t have minimum credit requirements, or give credit scores much weight.
Merchant cash advances
Merchant cash advances are for businesses that rely on credit card purchases — like retailers or restaurants. It’s an advance on your business’s future revenue, which you pay back plus a fee with a percentage of your daily sales. Since it’s based on revenue, most lenders typically care more about your business’s sales record than your personal credit score and don’t run a check.
Equipment loans are term loans specifically designed to help your business purchase new equipment. It’s a secured loan that uses the equipment as collateral.
While most equipment financing providers might do a credit check, many are willing to work with poor-credit borrowers. That’s because secured loans are less of a risk to the lender than unsecured loans, especially if your loan amount is based on the value of your equipment.
Asset-based financing is a type of secured business loan that’s backed by anything of monetary value owned by your business. For example, your business can use equipment, vehicles or real estate as collateral for an asset-based loan.
Since your loan is backed by collateral, asset-based financing providers are often open to working with all credit types. Some might even forego the credit check.
If your business serves an economically disadvantaged community, it could qualify for microloans or other types of financing from a local nonprofit. Nonprofits typically don’t consider your personal credit history and if they do, most are willing to work with poor- or no-credit borrowers.
Microloans can be particularly useful to a small business that only needs a small amount of funds to get started or expand.
Crowdfunding
Crowdfunding platforms like Kickstarter and GoFundMe allow businesses to raise funds from fans, friends and family. It can be a great way to fund a new project, especially one that’s easy to share on social media. Most platforms charge a percentage of the amount you raise as a fee, and some won’t let you collect donations unless you reach your fundraising goal. But it doesn’t consider your credit score when you sign up.
Investing some of your own money into your business is a surefire way to avoid credit checks. It can also look good when you’re applying for a business loan down the line — many lenders like to see that you’ve taken a personal risk yourself. Investors also often like to see that you have some skin in the game.
Friends and family
When all else fails, ask your friends and family to help finance your business. To make the terms legally binding, you can draw up a contract yourself or find standard agreements online. Since they already know you and your financial history, your credit score most likely won’t affect their decision.
It’s possible, but not likely. Most startup-friendly loans tend to rely on the business owner’s credit to make up for the fact that your business doesn’t have a long record of revenue.
You’ll have a hard time finding a legitimate lender that’s willing to completely forego a credit check. That doesn’t necessarily mean you need to have excellent credit to qualify for a startup loan — but it can help. Here’s how startup funding works by credit score
When your personal credit score falls in the highest ranges, you have the most options. You’ll likely qualify for startup loans based on your credit score alone, or consider taking out a personal loan to fund your business. You don’t need to worry very much about passing a credit check because you’ll likely pass with flying colors.
With good credit, you still have a wide range of options from most personal loan providers and startup loans. While you might not qualify for the same large amounts and competitive rates as someone with very good credit, you’ll likely get approved for most startup and personal loans.
With fair credit, your options are generally limited to alternative lenders and no-credit-check financing like crowdfunding. You’ll still make the cut for a handful of lenders that specialize in startup loans, however.
With poor credit, you might have better luck pitching to investors than getting a business loan. You could qualify for some short-term loans, but they’ll likely come with high rates and fees. If you need a loan, consider taking steps to improve your credit score or look for a local nonprofit willing to offer financing to someone with a low credit rating.
Is a no-credit-check loan right for my business?
Even if you have a low credit score, a no-credit-check loan might not be the best financing option for your business. A lot of no-credit-check options are only available to specific types of businesses and are often more expensive than your traditional term loan. Consider your business type and your specific financing needs before looking for financing based on a credit check alone.
Your business could benefit if …
You have poor credit. You might not qualify for a more competitive rate from a lender that runs a credit check.
You want to apply for personal financing soon. Recent hard inquires don’t look good when you’re applying for a mortgage or other large personal loan.
You’re new to the country. When you have no credit history, you won’t qualify for a loan that runs a credit check. Or, consider building your credit score with a credit builder loan or service.
Consider other options if …
You have good credit. Even if you need funds fast, you can likely find a better loan with an online lender that offers next-day funding but does a credit pull.
You need startup money. Startup financing tends to depend more on the owner’s credit rating than other types of business loans.
You don’t want to put up collateral. One way to beat the high rates on no-credit-check loans is to put up collateral. If you don’t want to, your options are limited and expensive.
Watch out for no-credit-check business loan scams
Some no-credit-check loans might sound too good to be true and that’s because they often are. Watch out for these red flags:
Guaranteed approval. No lender can guarantee that you and your business qualify before looking at your application.
Upfront fees. Legitimate lenders typically don’t ask borrowers to pay a fee before they even apply.
Fake accreditation. Stay away from lenders that advertise false accreditation from the Better Business Bureau (BBB) or other trade organizations.
No-credit-check business loans can be one of the more expensive business loan options out there. Unless you need emergency cash, look into other options to get the best deal your business is eligible for. Get started by visiting our guide to business loans.
Frequently asked questions
You can, though your options are limited if your credit score is below 600. Consider looking into a secured business loan, which has a higher approval rate and offers more favorable rates and terms than you might otherwise be eligible for.
You can, as long as you intend to use that car for mainly business-related purposes. Check out our vehicle financing guide for businesses to learn more about your options.
Some do, but most put more weight on your personal credit. That’s because personal credit scores are more commonly used than business credit scores.
Anna Serio was a lead editor at Finder, specializing in consumer and business financing. A trusted lending expert and former certified commercial loan officer, Anna's written and edited more than 1,000 articles on Finder to help Americans strengthen their financial literacy. Her expertise and analysis on personal, student, business and car loans has been featured in publications like Business Insider, CNBC and Nasdaq, and has appeared on NBC and KADN. Anna holds an MA in Middle Eastern studies from the American University of Beirut and a BA in Creative Writing from Macaulay Honors College at Hunter College, CUNY. See full bio
Anna's expertise
Anna has written 61 Finder guides across topics including:
Stacie Hurst is an editor at Finder, specializing in loans, banking, investing and money transfers. She has a Bachelor of Arts in Psychology and Writing, and she has completed FP Canada Institute's Financial Management Course. Before working in the publishing industry, Stacie completed one year of law school in the United States. When not working, she can usually be found watching K-dramas or playing games with her friends and family. See full bio
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