Alternative Small Business Loans with No Credit Check

Traditionally, all businesses start with a great idea…and a trip to the bank. For anybody who has been through the process, you’ll know all about the long meetings, extensive applications, credit checks, financial details, and all the other steps. It appears all you’re doing for several weeks is providing business, personal, and financial information. When an individual has poor credit, this was originally seen as the end of the dream.

Today, we’re here to tell you that alternative small business funding is available. If you’re looking for a no credit check business loan, the first thing to note is that your options are fewer compared to somebody willing to undergo a credit check. Naturally, these people are less of a risk for lenders. Yet, this doesn’t mean that you should close the laptop and give up on your business venture.

If you have a solid idea and determination, there’s no reason why you can’t make your dream work. In this guide, we’re going to explore why lenders check credit, why you might not want lenders to check your credit, and some solutions moving forward!

The Credit Check Process - Why Does It Happen?

First and foremost, why do lenders check credit? Let’s not forget, lenders aren’t giving money away out of the goodness of their hearts. Instead, they want to make money from the repayments. Therefore, lending money to people comes down to one thing: risk. Although lenders want to make money, they aren’t reckless in their decisions.

An ideal scenario for a lender is to work with a low-risk borrower. Why? Because they’re likely to pay the money back, with fees and interest, with no problems. The riskier the individual, the more likely they are to encounter problems. The lender then must chase up the client or get the money back another way (through collateral assets, for example).

To manage risk, lenders perform credit checks. If somebody has a perfect credit score and history, they offer very little risk to the lender. The credit history tells the lender that the individual pays back debts and maintains finances well. On the other hand, a poor credit report suggests that the individual doesn’t pay back debts and struggles financially.

Imagine a lender looking at a credit report and seeing missed payments, defaults, late payments, and similar issues. Lending money to this person or business is a risk because they’re likely to treat the loan in the same way. Suddenly, the lender is left having to chase up payments. For this reason, lenders secure loans against assets that they can claim should the individual fail to repay.

Furthermore, those with no credit history can also struggle to obtain financing because they present a risk for lenders too. Not because they have a bad credit history, but because they don’t have a history at all. There’s no evidence for the lender to decide whether they are low or high risk.

Reasons to Avoid a Credit Check

When some people see that a no credit check business loan exists, they wonder why. Why would somebody seek alternative small business funding and avoid credit checks?

Bad Credit - Perhaps most obviously, some people don’t want their credit checked because it’s bad. Either as an individual or a small business, you don’t have the credit to secure loans and other forms of finance. If you have bad credit, your need for financing is probably greater than most others. However, you struggle to get it - it’s a vicious cycle to get trapped in.

Previously, those with bad credit would have no access to finance at all. The good news is that the industry has progressed in recent years. These days, you’ll find alternative small business funding that focuses on cash flow rather than credit checks.

Lots of Pulls - Next, some small businesses have already had too many hard pulls on their credit report, and they worry about more. While soft inquiries don’t affect credit scores, hard inquiries normally do. Therefore, those who have already been through several hard pulls recently might want to avoid another to allow their report time to recover.

Not only do credit pulls affect your score, but they also stay on your report for all others to see. If a lender sees that you’ve applied for several sources of finance before this one, they may get scared away. This suggests that you’ve either been rejected by other lenders or that you could choose another lender over them (after going to all the effort of underwriting the loan).

Checking Your Options - Finally, the fact that you seek a no credit check business loan doesn’t necessarily need to have negative connotations. Instead, you might just want to explore your options before deciding the right path. Ultimately, it might be that the best option for your business is a bad credit business loan or another form of alternative funding.

Checking Your Credit Score

Before going any further, have you checked your credit recently? Often, we speak to businesses and individuals who assume that they have a bad score without looking. With a soft pull, you can check your credit score without it affecting the report. You may be surprised to find that your score is higher than expected. If this is the case, it can open doors for the business.

If it’s as expected, keep reading because we have some brilliant solutions in the second half of this guide. The days of old are gone which means that you don’t need to pay for your credit score (nor do you need to subscribe to monthly services). Without your credit score, you might not make the right decisions, so make this the first step today.

No Credit Check Funding Solutions

After checking your credit score and considering your options, you may decide to pursue a no credit check business loan. If this is the case, allow us to explain some of the best alternative small business funding solutions.

SBA Loans

Firstly, you may know of these as Small Business Administration loans. Either way, they can help small businesses that need finance in the early stages. The bad news is that lenders will eventually run credit checks. The good news is that they will normally prequalify somebody without having to run a hard credit check.

To take advantage of this loan type, it’s best to ensure that your debt service coverage ratio doesn’t exceed 1:1. By keeping this ratio low, you prove to all lenders that you can pay debt obligations back as expected. The South Florida Funding Group can help small businesses to obtain a loan of this kind, so feel free to get in touch today.

In case you’re unaware, the reason they’re called SBA loans is that the Small Business Administration secures a large part of the loan itself. Therefore, the amount that the business needs to guarantee is much smaller than normal. After you receive the funds, you can use them for equipment, staff, refinancing debt, or working capital.

ACH and MCA Loans

Short for automated clearing house and merchant cash advance respectively, the idea behind these two small business loans is to provide businesses with an advance on earnings. You know that earnings are coming, but suppliers are knocking on your door asking for payment. If this is the case, you’ll take out a loan with the promising of repaying when earnings come. For example, this is particularly valuable for seasonal businesses.

How do ACH and MCA loans differ? The business repays ACH loans at a set amount each month while you’ll repay MCA loans at a percentage of sales per month. Consequently, the amount you repay completely depends on sales and varies each month with an MCA.

Asset-Based Loans

If your business has assets, you may be able to borrow against these assets. Rather than running a credit check, the lender will use these assets as security. Of course, the downside to this option is that you will lose these assets if you cannot repay the loan as expected. Potential assets to use in an asset-based loan include accounts receivables, machinery, real estate, equipment, and inventory.

For those who are certain that they can repay the loan, this is a good way to raise short-term funds. If you’re not sure about repayments, you may want to investigate other routes rather than risking the business’s assets.

Business Line of Credit

At this stage, we’re going to move away from loans. Often, business owners think that loans are the only way forward, but alternative small business funding is more creative than ever before. As an example, a business line of credit acts like a credit card for businesses. As a flexible form of finance, you use the revolving credit whenever required.

Like a personal credit card, your account will have a limit and you’ll need to repay the amount eventually if you want to avoid fees and interest. Fortunately, many lenders allow you to prequalify for a business line of credit on a soft inquiry alone. Elsewhere, you’ll find other lenders that don’t consider credit at all.

With the South Florida Funding Group, we’ll help you get set up with an unsecured business line of credit. The application process normally only takes up to 48 hours and you only need a handful of months in business. Interest starts at 12% in most cases, and you can dip into the fund whenever required.

Equipment Financing and Leasing

If you seek a no credit check business loan because you want to buy equipment, you may not need a loan at all. These days, businesses are choosing the more modern solution which is equipment financing and leasing. Rather than a bad credit business loan, leasing allows you to pay a monthly fee for the use of machinery or equipment. The contract is ongoing, and you simply end this contract when you’re done.

If you want to own the machinery, the better option is equipment financing. Once again, you’ll pay a monthly fee but this time to get closer to owning the equipment fully. If you stop paying, you’ll lose the equipment. If you reach the end of the contract, you’ll own the equipment.

As we saw before, applications are fast, and you only need a couple of months in business to begin. The South Florida Funding Group will help with the application, and you can get equipment worth up to $1.5 million. Depending on your needs, you can repay over 6 months, 12 months, or even 24 months.

Summary

Credit checks indeed play an important role in small business loans. However, there’s no need to panic for those who want to avoid credit checks whether because of bad credit or too many pulls. Alternative small business funding is available, and no credit check business loans exist to help those in a difficult position.

The experts at the South Florida Funding Group have over 40 years of experience helping businesses to obtain the funding they need. Regardless of the stage of your business, or your need for funding, we’ll help you to overcome challenges wherever possible. With alternative small business funding, you can avoid the long application forms and waiting periods just to find out that you don’t qualify for a loan.

As you’ve seen above, there’s normally a solution for everybody. Those buying equipment can look at leasing and financing while those expecting lots of sales soon can use a merchant cash advance. Whichever solution you choose, make sure it’s the right one for your business.

Bad credit business loans do exist, but it’s a delicate topic that requires expert assistance. The process is fast, your options are flexible, and bad credit isn’t frowned upon - contact The South Florida Funding Group today to learn more about the different types of funding for small businesses!