Small Business Loans without Credit Check: All You Need to Know

It can be frustrating to have your business loan application rejected after a failed credit check. If you decide to apply with multiple lenders to improve the odds, your credit score could be impacted. After all, each enquiry is reported to the credit bureaus. Those with a low credit score are the worst hit. However, it is possible to get small business loans without credit check. Here’s how.

Advantages of small business loans without credit check:

No credit check:

The key difference is that the ‘hard enquiry’ will not appear on your credit report unlike regular small business loans.

Fewer terms and conditions:

Without a credit check, the odds of your loan application getting approved increase considerably. This makes it an ideal alternative for applicants with a poor personal credit score or no business credit history. Moreover, the paperwork required for loan processing is often minimal.

Debt consolidation:

You can also leverage the loan to consolidate any existing debts and finally pay them off.

Business Growth:

A short term small business loan can help you invest in growth activities like marketing or capital improvements. It can also be used to inject extra liquidity into your business, especially around sales season.

Trade-offs with small business loans without credit check:

Traditional lenders place a lot of emphasis on having a good credit score, particularly when it comes to unsecured loans. If you don’t qualify upfront, they may ask for security in order to reduce the lending risk. If collateral wasn’t available, it would usually mean the end of the road.

Today, non-bank lenders do not insist on credit check- especially if the loan amount is $150,000 or less. This has enabled small business owners with poor credit to access much-needed capital. However, there are certain trade-offs that would have to be made:

Higher interest rates:

No credit check business loans generally have higher interest rates compared to regular business loans. It is a way for lenders to justify the higher risk they are taking on. However, the total amount you repay also depends on factors like repayment period, and associated fees and charges including prepayment charges.

Shorter repayment periods:

The lender may reduce the repayment period in order to recover their capital faster. Depending on the repayment frequency, this can potentially impact the cash flow of your business. So, it is important that you discuss your cash flow concerns with the lender and work out a solution that is acceptable to both.

Tags: Small business loans credit check, Loan credit score check, Low credit score, Business credit history