Small Business Loans With No Credit Check – The Good and Bad
In an ideal world, a small business owner can easily obtain loans and other financing to cover startup costs and growing operating expenses. Unfortunately, this isn’t always the case. Especially early on when a company may not have established a detailed business credit history, or the personal credit of some entrepreneurs isn’t as strong as they would like it to be, seeking funding can often be an uphill battle.
To help ease the burden of these challenges, lenders offer a variety of small business loans with no credit check. However, it’s important to note that these types of loans are typically more expensive than a traditional loan and should only be used as a last resort. Also, it’s worth keeping in mind that by making timely payments on these loans, you can actually build your business credit and qualify for more competitive financing in the future.
The Good and Bad of Business Loans With No Credit Check
Many business owners are turned off by the idea of seeking a business loan with no credit check because they think it will lead to higher interest rates. That’s because a lender is taking more risk with a loan for a business with no or limited credit history than they would with one to a seasoned company with a great business credit score. To offset this additional risk, they need to charge a higher rate to make up for it.
With that in mind, there are lenders who do provide small business loans with no credit check, but they are usually only available to existing customers of another service offered by the lender. This includes lenders that work with a number of payment processing companies, including Square, Stripe, and PayPal, as well as ecommerce platforms, such as Payability.
These lenders do a soft pull at the beginning of the application process and then match you with lending partners who are best suited to your needs. This process allows you to avoid a hard credit inquiry, which can lower your credit score by five points or more.
Despite this, it’s still important to remember that even these lenders will do a credit check, and they are going to weigh both your personal and business credit scores. They will also look at other factors, such as your capacity to repay the loan and your capital and character, when deciding whether or not to approve you for a loan.
If you do need a loan for your business, it’s wise to consider alternatives to these loans, such as invoice factoring or merchant cash advances. These alternative options have a shorter repayment period and typically come with lower fees than a business loan, but they are only an option for those who can’t secure a traditional loan. If you aren’t sure which type of funding is right for you, it can be a good idea to speak with a financial advisor. They can help you understand your options and find a solution that works for you.