Getting financing for a small business is no easy feat. The traditional banking system requires business documentation, personal financial information and oftentimes a credit check for both the business and its owners. The credit score is used as a gauge for the ability to repay debt and is based on a number of factors including your history of paying back debt, your debt-to-income ratio and your overall credit worthiness. Many small business owners who are seeking funding have poor credit or no credit and may not want their lenders to perform a credit check during the loan application process.
Luckily, there are options available for those looking to obtain financing for their small businesses without having their credit pulled. These types of loans can help fund startup costs and other expenses for a company, but are not meant to be a long-term source of funding. This article will look at six types of small business loans that are offered by various lenders and do not require a credit check.
Business Line of Credit
A business line of credit is similar to a business credit card and can be used for a variety of purposes. This type of business loan is usually less than $100,000 and provides a set amount of money that you can borrow from the lender and pay back on a daily, weekly or monthly basis. Business lines of credit are often more flexible than other business loan options and can be used for unexpected expenses or to bridge the gap between a cash flow shortage.
Alternative and online lenders that offer this type of financing are able to provide more flexibility for applicants than traditional banks, who typically lend only to well-established companies to mitigate their risk. This is especially true for entrepreneurs who may have no business credit or a limited credit history, such as startups or young companies. This type of funding can also be a good way to build business credit, as each on-time payment is reported to the credit bureaus.
While the majority of these lenders will still use a credit check, they tend to do so less frequently than other small business lending institutions and often only on the applicant’s personal credit rather than the business’s credit report. In some cases, these lenders will also use a soft credit inquiry that will not impact the applicant’s score.
Other options for small business funding that don’t include a credit check include invoice financing and line of credit loans. Invoice financing allows a business to borrow against unpaid invoices and can be used to cover payroll, operating expenses or other expenses. Line of credit loans can be used to purchase inventory or other assets and are generally used to support a short-term need.
If you are in need of funding for your small business, there are a number of financing solutions to consider. Those with the best credit may find that they are able to qualify for traditional bank or other lending institutions, while those with poor or no credit should try to work on improving their scores before applying for financing. small business loans with no credit check