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Business loans are beneficial to help your business grow and most of the time it is required to have good credit score to qualify. But what if you want to avoid a credit check because you have poor or no credit? If you do not think you will qualify for a loan or other types of financing, there are financing options available out there that do not require a credit check.
Types of Business Loans with No Credit Checks
Crowdfunding
Crowdfunding is a popular way for small business owners to get funding for their business. You can raise the capital you need from friends, family members, customers, and investors. There are many crowdfunding sites you can choose from that make it easy to create and start to receive funds.
Small Business Grants
Small business grants are great because unlike traditional small business loans, you do not need to pay them back. You only must be able to qualify which can be hard to do. Research small business grants in your industry and see if they have any available for you to apply for.
Microloans and Nonprofits
You might qualify for a microloan if you are a small business owner that comes from a disadvantaged background. Microloans and nonprofits will not run your credit as your creditworthiness is not required to obtain a loan from them.
Friends & Family
If none of above suit you, you can always try asking friends and family to help you out. They are probably going to be willing to help you invest in the future of your company. This comes with risks though so make sure you fully understand what they are and know what your plan is to do with the funds you receive from them.
Low Credit Score Business Loans
Below are the following loans you can apply for if you have a low credit score.
- Business Lines of Credit: the requirements to get a business line of credit are you must be in business for at least 6 months or longer, have at least $50,000 in revenue each year and have a credit score above 559.
- ACH loans: with an ACH loan, low credit scores are not scrutinized. Lenders look more into the future of your business rather than its past.
- Merchant cash advances: a merchant cash advance allows you to borrow against your future earnings therefore your history is less important.
How to Build a Credit Score
If you would like start building your credit score, there are a few steps you should take.
The first step you need to take is open a business account. You need to incorporate your business as a legal entity such as a limited liability company or a corporation. You then need to set up your Employer Identification Number (EIN) on the IRS government website. Register with a business credit bureau such as Dunn & Bradstreet Corporation and receive a DUNS number. This is where lenders will be able to view your credit history when your information is in the database. Use your EIN and DUNS number to open a business checking and savings account. Then get a business credit card to make purchases for your business to help you to begin establishing your credit.
By following the steps above you will be able to start to build your business credit. Lenders will be more willing to work with you by having a solid credit score and will determine how creditworthy you are.
Keeping Your Credit Score Healthy
Once you start to build up your credit score, it is important to make the effort to keep it as healthy as possible. Two ways to do this is by making your monthly payments on time and avoid borrowing more money than you can afford. Most importantly, your payment history is the largest metric of having a positive credit score.
Having a healthy score is also beneficial for your business because you will have better access to capital when needed, you are more likely to get approved for business loans, you will have access to unsecured lines of credit and improved cash flow.
The Bottom Line
As you can see there are ways around to getting capital for your business if you do not have a credit score. Whether you choose low credit small business loans or crowdfunding, you can still receive funds for your business. You can also work on having a credit score and keep it healthy so lenders will be more favorable when making their decision to lend you money.
