When you're ready to turn your dreams into reality and start your own business, securing a business loan can be the key to unlocking your potential. It's a powerful step that can launch your company into the market. But having your credit looked at to obtain the loan can be stressful, especially if your score isn’t perfect.
Fortunately, conventional business loans and lines of credit can be obtained without a credit check. Thus, one can increase one's chances of securing capital for short-term or long-term purchases.
A business loan with no credit check is a financing option that doesn't consider your credit score when deciding if you are eligible for the loan. This type of financing option provides alternative methods to traditional banking institutions. The benefit of this type of loan is that a business owner with poor credit can still make short-term purchases necessary to build their business.
Types Of Business Loans With No Credit Check
Although you won’t be able to get a traditional type of ‘loan’ as you would with Average, Good, or Excellent credit, it's not the end of the world. You can still explore alternative financing options that can work for your business needs.
Invoice Factoring
Factoring involves using a third party to buy a business's accounts receivables. The third-party financing institution is repaid by keeping a percentage of the business's invoice. A third-party source makes money from this deal by keeping the difference between the accounts receivable and the total invoice amount.
Companies can find an invoice factoring third-party service. They can also identify legal options that are different from traditional lenders or banks.
Invoice factoring is always one of the most popular options when weighing the best business loans with no credit check. Small and medium-sized businesses love invoice factoring. They can get cash without waiting for clients to pay. If a small company has recently opened, invoice factoring can help it get a loan without requiring immediate capital.
Invoice factoring can boost a new business's cash flow. This is true, especially if the company has outstanding debts, clients that owe it money, or low sales. Startups and entrepreneurs will thrive by using invoice factoring to boost their business scale.
Companies can use two main types of factoring: recourse factoring and non-recourse factoring.
- Recourse — A company sells its accounts receivable to a factor.
- Non-recourse — The factor assumes the risk for the uncollected invoices, meaning the business is not liable for debts.
Compared to other business loans, there are many perks to invoice factoring. Small-sized companies and new businesses can access enough capital to grow their brand without debt. Plus, they can continue to operate as usual. They can do so without pressuring clients to pay for outstanding services or products.
One downside to invoice factoring is that it can be more expensive than a traditional credit line or loan. Plus, the business owner needs to give the factor permission to collect the customers' outstanding amounts.
Merchant Cash Advance
A merchant cash advance is a smart alternative to a loan that might need a lengthy approval process and strict credit requirements. This type of cash advance is given based on the current business's credit. Instead of waiting for loan approval, businesses often see the cash advance quickly deposited into their accounts.
A merchant cash advance is based on credit card receipts. They determine how long the advance will be repaid. The proof of income and receipts provide information to the lender on the correct cash advance amount and how long it will take to repay the debt.
The typical repayment cost for an MCA is relatively high compared to alternatives due to the lack of credit score and business reliability, coming in at between 20% and 40%. The ‘holdback’ amount is calculated based on the business's funds, payback time, and monthly credit card sales.
Business owners can determine if the merchant cash advance is suitable for their business based on the necessary speed of a sale. If they need to take advantage of a sale, deal, or discount, a cash advance can help a company make necessary purchases during a specific promotion to help its business at a lower price.
The perks of a merchant cash advance compared to other financing options are fast access to money, flexible repayment terms, and the lack of collateral required. Yet, there are drawbacks. An MCA is very expensive, requires credit card sales, and does not impact the businesses' or individuals' credit scores.
Vendor Financing
Vendor financing involves a vendor lending money to a customer. The customer then uses this capital to buy the vendor’s products, services, or offerings. In short, this is a ‘trade’ using deferred loans, capital, or stocks.
From the vendor's point of view, this isn’t an ideal situation — the vendor will have to provide their company's benefits without receiving payment. However, the vendor can receive interest on the delayed payment.
Plus, vendor financing is a helpful tool for new businesses that need capital to buy a business outright but need more money. By providing financial backing through a vendor financing loan, the company or individual can buy the business and strengthen the working relationship with the owner.
Crowdfunding
Crowdfunding is an intelligent way for startups and new businesses to get capital. They can source money from their family, friends, colleagues, and co-workers to begin a company based on people’s goodwill. By showing everyone the purpose of their mission, a well-constructed business plan, and their goals, they can convince or persuade others to get involved in their idea, product, or service.
Best Business Loans With No Credit Check In 2024
Knowing the best options for your company regarding the best business loans without a credit check is vital to staying afloat. We understand that an uneducated purchase, failed business decision, or heavy spending can influence a credit score. That is why obtaining a business loan without dredging up your credit history can be essential. It allows owners to make a one-time purchase that benefits their business for the foreseeable future.
Let’s see the top options for business loans with no credit check in 2024.
Kiva
Kiva is a peer crowdfunded loan that ranges from $1,000 to $15,000, offering a term of up to 3 years. The perks of this business loan are that businesses can borrow without interest and market their products to millions of lenders on the platform.
The downside of this business loan is that family or friends will have to lend the money to you. It can take a while to crowdsource the money, fund the loan, and get started.
Credibly
A second business loan option for those with low credit scores is Credibly. This business loan offers working capital, long-term, and merchant cash advance loans. Loan amounts range upwards of $60,000, making it a more suitable option for medium-sized businesses with an A+ Better Business Bureau rating.
Credibly offers various options for small and medium-sized business financing. The platform allows desperate businesses to get approved in as little as four hours. Plus, businesses need a very low minimum credit requirement to qualify for any loan ranging from $5 to $60,000.
The downside of this type of business loan is that it requires a hefty monthly revenue of >$15,000. This makes it hard for new businesses or small startups that don’t make that much money in their industry.
Square Loans
If your company uses Square for payments, the Square small business loan can provide upwards of $250,000 for a loan. Not only is this one of the highest amounts for approved loans, but it does not need any minimum credit score to apply.
The perk of the Square business loan is that loan repayments are automatic, reducing the need for manual payments or missing payments altogether. Plus, there are no late fees, and applying won't harm your credit score.
The downside of this type of loan is that businesses must be Square vendors to qualify for it.
Ondeck
OnDeck offers different funding options that work for your business, including an OnDeck Line of Credit and an OnDeck Term Loan.
The OnDeck Line of Credit offers credit upwards of $100,000, provides flexible repayment terms, and works well for consistent business needs. But the OnDeck Term Loan offers higher loan amounts of up to $250,000, repayment terms of up to two years, and more flexibility for a greater ROI in your business.
The benefit of using OnDeck is that there are no credit pulls, meaning you can check your eligibility for a line of credit or loan without affecting your credit score. Plus, you can build your business credit history to make you more desirable to financial institutions in the future.
How Can I Fund My Business?
It can be stressful if you are wondering how to get business loans without a credit check. But don’t worry — many types of financing don’t correlate to traditional loans for your company.
Check out Business Loans today to get started browsing whether a merchant cash advance, invoice factoring, term loans, credit cards, vendor financing, and other startup choices are the most intelligent options for your financial state.
