It’s no secret that loans allow businesses to cover several expenses like inventory, equipment, payroll, etc. However, if your company does not have good credit, it can be challenging to qualify for the loan.
No Credit Check Business Loans
The excellent news is that your business can still get funding without a credit history. Lenders today offer no credit check business loans. Additionally, they are willing to take the chance on those borrowers without credit history or having only limited credit.
But how does this loan differ from the usual ones you see on the market? Here is a comprehensive guide about no credit check business loans, their benefits, types, and how to qualify for one.
What is the loan all about?
In general, companies will secure no credit check small business loans if they do not have an excellent credit score. Some do not want the hassle of inquiring about it. At the same time, others look for loans that do not need personal guarantees. Perhaps they want to separate personal and business finances completely.
Whatever the case, lenders offering no credit check business loans look beyond the credit score. Instead of the traditional credit score, they typically need the borrower’s personal information showing they can repay the loan on time. The information can include proof of income or pay stubs, borrowing history records like student or auto loans, and bank statements.
This is to determine whether borrowers can repay what they owe. Additionally, these loans are like alternative financing to traditional loans.
In contrast, lenders offering traditional business loans evaluate the business according to the five C’s of credit – capacity, character, capital, conditions, and collateral. These factors will give lenders a basis to understand the borrower’s creditworthiness.
Kinds of Business Loans with No Credit Check
Similar to other loans, no credit check business loans come in different kinds. This will give borrowers more options based on the needs of their business.
Invoice factoring. This is a cash flow solution for businesses relying on invoices from government agencies or other companies. This is one of the no credit check small business loans where the business sells the invoices to a factoring company at a discounted rate. Usually, these invoices are due within the next thirty or ninety days. Factoring companies do not generally check a business’ credit scores. Instead, they might consider the clients’ payment capabilities. This is because some companies require businesses to repurchase invoices that clients fail to pay. Consequently, this makes it even less risky for factoring companies.
Invoice financing. Lenders might not need credit checks for this kind of loan. It’s slightly the same as invoice factoring but with some significant differences. Instead of getting an advance for unpaid invoices, invoice financing is like a short-term loan based on the invoices’ value. The borrower’s company will be in charge of collecting the invoices and repaying the loan as they’re filled. Additionally, invoice financing involves interest.
Merchant Cash Advances. A merchant cash advance is a no credit check business loan designed for those who rely heavily on credit card purchases. Industries like retailers and restaurants fall into this category. It’s like an advance on the business’s future revenue. The borrower then pays back the advance, including a fee with a percentage of the daily sales. MCAs are revenue-based. Hence most lenders generally look closely at the business’s sales record instead of the personal credit score. Additionally, running a credit check will not be very necessary.
Equipment loans. When businesses need to purchase equipment, they generally turn to equipment loans. They are secured loans where the equipment serves as collateral. In most cases, lenders of equipment loans will conduct credit checks. However, some are willing to lend money to borrowers with poor credit. Generally, secured loans are less risky than unsecured loans, primarily if the loan amount is based on the equipment value.
Asset-based financing. Asset-based financing will always be on the list when one thinks of securing no credit check small business loans. The loan is usually backed by anything the business owns, which is worth the money owed. In context, your business can use real estate, equipment, or vehicles as collateral when applying for an asset-based loan. Since the loan is secured with an asset, many lenders accommodate working with any credit type. Hence, making this financing one of the command types of no credit check business loans.
Business line of credit. Lines of credit function similarly to credit cards. Lenders offering this loan allow a maximum amount of money that borrowers can access as needed. They will only charge interest or fees on the funds used, not the entire amount. Also, line credit is generally revolving. This means borrowers can use the money, repay it, and use it again.
There is more to no credit check small business loans than merely getting the cash that businesses need. See the list of advantages this kind of loan offers to borrowers.
No credit check business loans involve fast processing. Additionally, the application is straightforward and convenient. In most cases, lenders provide online applications like Booster Financial. The loan application even allows borrowers to process even in the comforts of their homes or offices. Furthermore, it will only take applicants a few more steps, typically beginning with filling out an online application form.
The borrower’s credit score will not be a concern. Lenders offering no credit check small business loans will generally not base loan approvals on credit scores. Hence, you need not worry about having a poor credit history. Instead, you can focus on immediately applying for the loan.
Lenders can approve loans in just a short time. In most cases, online lenders like Booster Financial provide funding in just a matter of hours. This makes no credit check business loans ideal for companies seeking immediate financing. Borrowers need to ensure that the required documents are complete.
No credit check small business loans are suitable for those looking for immediate cash. Since the application process requires less time than traditional loans, borrowers can also expect faster cash disbursement. Consequently, this type of funding allows companies to get cash as soon as possible.
In most cases, lenders will only need fewer requirements. In traditional loans, borrowers must submit multiple financial statements besides the credit score. However, for no credit check business loans, one only needs to have the essential documents that applicants generally possess. In most cases, the papers can include government-issued identification, citizenship certificate, proof of income, and bank account information. They all prove eligibility when one applies for no credit check small business loans.
Looking at the advantages of the loan, it may seem that it’s all about good things. However, to see a product’s or service’s full potential, you must examine the possible drawbacks to set proper expectations.
Some lenders might impose higher interest rates. For no credit check business loans without any collateral, it could mean higher risks for lenders. To compensate for the risk levels, lenders might hike the interest rate. Interests differ from one lender to another, so it pays to check on your chosen lender.
Costs can be higher. This type of loan sure is convenient. However, the additional costs can be a little bit higher. In most cases, processing expenses and other fees cover the said costs.
If not properly researched, the loans might be prone to scams and risks. With various lending companies today, one, in one way or another, may encounter fraudulent financial institutions. This is why before choosing one, ensure you research the lender’s reputation and credibility.
Some lenders might only offer a limited amount of cash. While this may be a case-to-case basis, some lenders provide a loan cap for their borrowers. For companies seeking a more considerable loan amount, inspecting how much lenders can provide should be beneficial.
Why apply for no credit check business loans?
Any business, especially small and newer ones, can apply for no credit check business loans. However, there are common reasons why companies opt for these kinds of loans.
Expansion. A business’s goal is to expand and reach out to new markets. However, small companies might struggle with this aspect since expansion can be costly. With a no credit check business loan, they can get funding for business growth without affecting the company’s daily cash flow.
Establish business credit. You will never know when you’ll get another loan the next time. Since no credit check small business loans are easier to secure, your business can maximize them and build business credit for the future. So long as you accomplish repayments on time, you are assured of better credit history at the end of the loan term. This gives you an edge once you decide to secure loans with much more significant amounts.
Equipment purchase. A business will eventually need equipment to have a smooth operation. In most cases, pieces of equipment also ensure much better customer service. Whether you need machinery, tools, or IT equipment, you can use no credit check business loans for funding.
Inventory purchase. There must be enough inventory to keep up with customers’ demands. Companies must ensure to replenish stocks with plentiful and high-quality options. However, replenishing can be challenging, especially in slower months. Hence, you need some funding to cover inventory costs. No credit check small business loans also help companies restock items by not hampering the daily cash flow.
Additional workforce. As the business grows, you can expect the need for more human resources. In most cases, companies use the loan to invest in more talents and workforce for the business.
What are the requirements?
As mentioned previously, no credit check business loans only require fewer requirements. This is one of the reasons why borrowers can easily apply for a loan. In terms of requirements, every lender varies. Here are some of the common documents they might need.
Time in business
Purpose of the funding
Personal tax returns
Tips on how to select the best lender
Requirements. The list of requirements in the previous part of this article is just a guide on what borrowers must expect when applying for a loan. It does not mean that lenders will ask for all of those written. Hence, borrowers must first check with the lender on the specific requirements and prepare them before applying.
Loan amount. A borrower also needs to identify how much funding the business needs. This way, they can streamline lenders offering such amounts. Each lender has a specific range of loan amounts they can disburse to borrowers.
Loan type. Each type of no credit check business loan is designed for specific needs in the business. By choosing the type of loan, you can easily choose a lender offering the best loan solutions.
Loan terms. The terms of the loan affect the number of repayments. Additionally, the terms must coincide with the business’s budget and other financial plans. Ensure to look for lenders who can better accommodate the conditions without affecting elements in your business operation like cash flow.
Cost. Besides the repayment amount, you can expect additional loan costs like processing fees and interest rates. See that you cover these factors to avoid surprise fees when repayment dates come.
Customer support. Regardless of how often you have applied for loans, you will always encounter unfamiliar circumstances. Hence, excellent customer support can come in handy if you have questions about your loan. Also, online lenders have financial advisors you can talk to if you still have questions about no credit check business loans.
Can a business get a loan with bad credit?
Yes. Several lenders specifically cater to borrowers with an insufficient credit history or those with poor credit scores. Specifically, no credit check small business loans do just that—no need to present credit scores.
How can I improve my credit score?
There are several ways to build a more considerable credit score. When you get a loan, ensure to pay on time and avoid defaulting. Additionally, limiting how often your business applies for a loan is beneficial.
Do traditional banks offer no credit check business loans?
Banks will rarely offer such a loan. As you may know, they implement strict borrower requirements, even requiring much higher credit scores.
Can my business secure a loan without a credit score?
Yes. Lenders will look into other aspects with no credit check business loan to prove that your business can repay the loan. In some other cases, loans can involve collateral resulting in lenders not relying heavily on your credit history.
Why are no credit check business loans popular?
Not all businesses can sustain operational costs for long. In the long run, some will likely turn to loans to help finance business operations. Sometimes, companies do not have a considerable credit history to qualify for larger loans. Hence, they would turn to lenders offering loans without needing credit history and credit scores.
How do lenders determine loan rates?
Lenders have different ways of implementing loan rates. They can base it on the terms of the loan, the amount, and the possible collateral involved.
Understand Your Options
Find out more about the different finance opportunities available in your area and get funded today!