Can You Get a No Credit Check Business Loan?

Credit often stands in the way of success for businesses. Perhaps you have poor or no credit. Maybe your credit is fine, but you’d rather keep a clean report.

Can You Get a No Credit Check Business Loan?

Credit often stands in the way of success for businesses. Perhaps you have poor or no credit. Maybe your credit is fine, but you’d rather keep a clean report.

Is it possible to find funding without lenders prying into your credit score?

At BCCUSA, we aim to help you get the funding you need, no matter your situation. For your business, that might mean exploring alternatives to traditional financing vehicles that require credit checks. Learn more about your options below.

Why Do Lenders Check Your Credit?

When lenders lend, they’re bearing risk. Your business may fall on hard times and be unable to pay back the full loan.

Credit score helps them determine the likelihood of such an event. A higher credit score implies a higher chance you’ll successfully repay. Their ideal borrower has perfect credit, no derogatory marks (bankruptcy, collections, defaults, etc.).

Then there’s someone with poor credit. These borrowers are riskier to the lender, as poor credit implies difficulty handling debt responsibly. Borrowers with poor credit may have missed payments, failed to make timely payments, defaulted on debt, or even declared bankruptcy — all worrying signs to lenders.

Lenders also use credit score to make interest rate decisions. Interest rates effectively serve two purposes:

  • Attract borrowers more likely to pay back the loan (and discourage riskier borrowers from taking the loan)
  • Hedge against default — if you have poor credit (and, by extension, a higher interest rate) and default, the lender recoups more losses by charging more interest

Most lenders will look at both your business and personal credit scores. If you don’t yet have the former, then they’ll only consider the latter.

With that said, they’ll be more reluctant to give out a loan. Less data means uncertainty, and uncertainty means more risk.

Hard Inquiries vs. Soft Inquiries

When lenders check your credit report, one of two events occurs:

  • Hard inquiry — also known as hard credit pulls
  • Soft inquiry — also known as soft credit pulls

Hard inquiries are formal credit checks. They give lenders a comprehensive view of your credit score and history. With this information, lenders can decide on approval, interest rates, and cosigner requirements after you formally apply for a loan.

Hard inquiries ding your credit a bit — more if you have little credit history. They also go on your report. Too many at once can make lenders nervous about lending — the reason being that it looks like you’re struggling and need debt to stay afloat.

However, the effects fade over time, and they fall off after two years.

Soft inquiries are informal checks. Lenders use them for identity verification and to get a brief overview of your credit. Most lenders will run these checks for prequalification purposes. For this reason, they don’t hurt your score.

Who Should Get a Business Loan That Doesn’t Require a Credit Check?

You should consider getting a no credit check business loan if you meet at least one of the following criteria:

  • Poor credit
  • Little to no credit history
  • You want to avoid the hard inquiry

Poor Credit

Poor credit makes getting a loan approval tough. You have to spend more time applying to lenders because you’ll get more “no’s”. Hard inquiries add up, hurting your score further.

Little to No Credit History

If you have little to no credit history, getting a loan requiring a credit check is almost as hard as if you had poor credit. Lenders may be less hesitant if you demonstrate strong financials, but you might still get stuck with high interest rates.

You Want to Avoid the Hard Inquiry

Perhaps you have a healthy credit history, and you want to keep it that way, yet you need some fast funding for a new project, then getting a loan that doesn’t require a credit check might be the way to go.

No Credit Check Business Loans

You have options, despite being shut out from traditional lending. Here are some loans you can get without having your credit checked.

Keep in mind that some lenders offering these options may still run a credit check, although it’s less likely than with traditional loans and lines of credit. 

Invoice Financing

Invoice financing is a fast funding method during which you borrow money against your outstanding accounts receivable. The lender hands you between 75%-90% of the value of your receivables up front. 

Then, when your customers pay their invoices, you pay back the loan plus fees and interest.

You can also sell your invoices to lenders via a process called invoice factoring. Your lender (or, in this case, buyer) remits you a large portion of the value of your accounts receivable up front and purchases these receivables. They then collect on the invoices.

Once they collect from your customers, they send a portion of the proceeds and keep the rest as interest/fees.

Merchant Cash Advances

Merchant cash advances aren’t loans — they’re advances against future credit sales. The advance provider lends you a lump sum of cash up front. You then arrange for a portion of your credit sales to be paid towards the provider.

You’ll end up paying back the loan plus extra based on the factor rate, a decimal between 1 and 2. This factor rate operates a lot like a fixed, simple interest rate.

Hedge Fund Capital

Hedge funds seek alternative investments with significant growth potential. If you can show them said potential, they won’t care about your credit score.

With that said, hedge funds often create complex financing structures — which you may be too busy to understand.

Royalty Capital Funding

Lastly, we have royalty-based capital. In a royalty funding agreement, your lender hands you a lump sum of cash. In exchange, you pay them a slice of all your future sales until you’ve achieved the lender’s desired rate of return, or the agreed-upon loan term expires.

Royalty-based lenders want to see a history of stable revenues and strong growth potential. You’ll need solid financials and a bulletproof pitch — something a loan broker can help you with.

One downside to this funding method: it can get expensive. If sales boom but you have a long payback period, you’ll fork over a massive chunk of revenue.

Thin profit margins can also pose a problem. You need every penny you can get, and royalties could erase your profits.

Don’t Let Credit Stop Your Success

Lenders may be reluctant to move past your credit score, even if you can demonstrate growth potential. That shouldn’t stop you, though. 

If you need help exploring your no-credit options, BCCUSA is happy to help you navigate your options. Our goal is to get you the best source of financing and avoid pitfalls along the way.

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