No Credit Check Business Loan

If you own or operate a business, the chances are that, at some time or another, you’re going to need some form of business finance. Ordinarily, this should not present any difficulties or concerns. After all, financing is common in business. And, business financing has been around since time immemorial.

Financing comes in many forms. Traditionally, loans have always been underpinned by some type of security or assurance. Security may be asset-backed or based on an evaluation of future value-added. For larger corporations and established or diversified enterprises, meeting a lender’s criteria should not usually be an issue.

Startups and small businesses, however, very often just don’t have the commercial stature to satisfy these credit requirements. Sometimes, a business has a product or service that is unique or revolutionary and is expected to take the market by storm. Funding, in such cases, would be based on the assurance of adequate incremental revenues to comfortably service the repayment obligations.   

More commonly, though, lending to small businesses is dependent on the credentials of the owners. Lenders tend to attribute the same behaviors and habits to a borrower in their business capacity as they do in the borrower’s personal life. Bad financial habits and a poor record of meeting debt obligations are likely to be perpetuated in the business.

Consequently, the borrower would be deemed to represent a high risk of default. Ultimately, lenders want to ensure full recovery of the loan together with the requisite profit.

One of the key steps in credit vetting a small business owner is the credit check. A credit check is a report that provides details of a person’s credit history. See the credit check as your financial reliability pedigree. Apart from personal and employment details, the credit check reports detailed information on every loan you have taken out during a specified period.

If you have not conducted your financial affairs very well, this credit score will reflect it. And, lenders will, naturally, take a more cautious view. A poor credit score is very difficult to remedy. One or two blemishes can haunt you for several years.

Bear in mind also that, when applying for finance, you usually automatically authorize the prospective lender to perform an inquiry into your credit score. In itself, this inquiry may further damage your score. Particularly if several inquiries are performed in a short space of time.

Lenders may see multiple successive inquiries as an attempt to secure several loans simultaneously. This, obviously, would cast doubt upon the borrower’s ability to meet repayment terms. At the very least, it may show that you’re evaluating options and may not take up a loan, despite a lender’s efforts to process your application.

So, there are several reasons a small business owner may want to navigate around credit checks? Fortunately, although somewhat limited, there are a few options for raising a no credit check business loan.

Invoice Factoring

A financing mechanism that has gained traction in recent times, invoice factoring is one of the easiest ways to obtain business financing. With this form of financing, the lender’s security is the borrower’s accounts receivable book. Hence, it is also referred to as accounts receivable financing.

Essentially, the borrower’s financial position and credit history are not relevant to a lender’s assessment. The finance is advanced against the vorrower’s customer’s perceived ability to pay its invoices within the agreed terms. The borrower’s customer, therefore, represents the lender’s credit risk.

Typically, a lender will consider only government or commercial customer invoices. In addition, only invoices that are within agreed terms will be considered. Commonly, invoices outstanding beyond 90 days would be excluded.

Based on an assessment of the quality of the borrower’s customers, the lender will advance a percentage of the debt. The lender charges a fee against each invoice. The fee covers the lender’s return on investment and the administration cost of managing the advance.

With a few exceptions, accounts receivable financing is with recourse. This means that, if a customer fails to pay an invoice within a stipulated time frame, the borrower is obligated to buy the invoice back. The amount payable by the borrower will be the amount advanced together with the lender’s fees.

The cost of this form of accounts receivable financing is usually relatively low as the financial risk for the lender is low. Most often the charge is based on the time value of money from the point the funds are advance until the date the invoice is expected to be paid.      

Asset-Based Loans

An asset-based loan is exactly as the name suggests. A loan is offered against the security of a specific asset. Typically, a lender would advance a percentage of the value of an asset to the borrower in exchange for rights to the underlying asset.

The exact nature of such rights will depend on the type of asset. In the event that the borrower is unable to meet his commitments, the lender has a legal right to assume full beneficial ownership of the asset without further compensation to the borrower.

The lender has the choice of liquidating the asset or continuing to utilize it to generate a return. In order to protect its financial exposure, the lender would usually value the asset based on its potential selling price in a forced sale situation.

The borrower’s repayments will include interest and other fees, resulting in a substantially higher amount being eventually repaid. However, because the loan security is something tangible that can be sold at arm’s length, rates and fees are usually far more favorable than most other options.   

Merchant Cash Advance

Similar to accounts receivable financing, a merchant cash advance is not based on the borrower’s creditworthiness. In this instance, a lender advances funds against future sales.

The repayment of the advance was, historically, based on a percentage of credit card and debit card sales for an agreed period. Nowadays, however, fixed periodic repayments can be automatically deducted from the borrower’s bank account through the Automated Clearing House. This has opened the model up to include other customer payment methods.

It bears noting that merchant cash advances can be extremely costly and that the repayments can be very onerous.  Repayments are calculated at the time the advance is made and, if sales subsequently fall, the business may run into severe cash flow problems. Therefore, this should always be considered a last resort option.

So, to sum up, whatever the reason you are averse to a credit check, there are financing options available.  Just make very sure you have diligently assessed your options. Make sure you understand all the risks and the costs. While a no credit check business loan could be what saves your business, it could very well also be the thing that sinks it.

Consider consulting with an expert who might be able to help: Drew at South Florida Funding Group, 786-544-2700 or email: This email address is being protected from spambots. You need JavaScript enabled to view it..