You need extra capital for your business, and a small business loan seems like the logical next step. Can you get a business loan with no credit?
Can I get a business loan without credit checks?
Although you can get a business loan without a credit check, keep in mind that options will be limited. Traditional business lenders offering low-interest loans always carry out creditworthiness checks before approving a loan.
However, some alternative lenders offer financing options regardless of creditworthiness. These lenders may not take credit into account at all, focusing more on the company’s performance and income.
If you have low creditworthiness or do not want to add multiple queries to your credit report, some lenders make a gentle effort to pre-qualify the loan.
Business loans without a credit check: what are they?
When you think of a business loan, you can think of a traditional bank loan. Thanks to these types of loans, lenders thoroughly assess you and your company for five C loans: ability, capital, nature, collateral and conditions. These five factors give lenders a thorough understanding of how you use credit responsibly on behalf of your business.
Business loans that don’t require credit checks work a little differently. With these financing options, lenders focus on other aspects of their business, in addition to assessing creditworthiness, to determine the likelihood of a loan being repaid. This puts most unsecured business loans in the alternative financing category.
“Alternative business lenders have easier applications, milder credit requirements and potentially faster access to funds than traditional bank loans,” says Farhan Ahmad, co-founder and CEO of the Bento for Business financial operating platform.
What credit rating do you need for a small business loan?
There is no specific creditworthiness assessment that you can rely on when approving all business loans because it will vary depending on the lenders and types of loans.
A loan supported by the Small Business Administration usually requires a FICO credit rating of 680 or higher, but other loan options may have higher or lower requirements. Alternative lenders will work with lower credit ratings, but will charge higher rates to reduce risk.
Lenders usually decide to grant loans based on both personal and business assessments. Personal credit ratings are based on your personal credit history and habits. This includes the total amount of debt compared to the total credit limit, payment history and frequency of applying for a new loan.