If you have bad credit, searching for small business loans may feel futile. It’s even harder if you’re a startup just trying to get off the ground.
Unfortunately, startup business loans and no credit check business loans are generally unavailable. Most business lenders require a credit check. And very few lenders are willing to lend to startups with less than three months in business.
Still, there are a few business loan products that could help you access the funding you need, including:
You might also consider alternative sources of financing, including:
While few, there are some options for startup financing with no credit check. If you run a new business and don’t have a strong credit score yet, here’s what to consider.
Fundbox is one of a handful of alternative lenders that offers invoice financing with no hard credit check until you know your credit limit and fees.
Fundbox offers lines of credit based on invoice collateral from $1,000 – $100,000 at rates starting at 4.66% of your draw amount.
You’ll need at least two months of invoicing history and at least $100,000 in annual revenue.
In general, invoice financing can be a good option for business owners with bad credit. Because borrowers use invoices as collateral, lenders don’t rely as much on their personal or business credit scores.
PayPal Working Capital doesn’t require a credit check or credit history to qualify. Instead, they look at your PayPal sales history.
You need to have a PayPal Premier of Business account for at least 90 days before you can apply. Eligibility largely depends on the number of PayPal sales and transactions you bring in, not on your credit score. You need annual PayPal sales of at least $15,000 (PayPal Business) or $20,000 (PayPal Premier) to qualify.
With PayPal Working Capital, you can apply to borrow an amount that’s up to 30% of your last 12 months of PayPal sales—capped at $97,000 for your first PayPal business loan and at $125,000 for subsequent loans. To repay the loan, PayPal takes a fixed percentage from your PayPal account.
American Express card holders may be eligible for collateral-free financing of up to $75,000. Interest rates on American Express business loans are fixed and range from 6.98% to 19.97%, with terms of six, 12, 24, or 36 months.
You can get pre-approved for funds without a hard credit pull if you meet American Express’s eligibility requirements, but you have to be a card member and will need to be pre-qualified by Amex.
Regardless of your credit score, if you’re a startup, you might qualify for a microloan.
These lenders aren’t out for their financial benefit—many of them are nonprofits that want to help traditionally marginalized groups and strengthen struggling communities. So, generally speaking, microlenders won’t require you to demonstrate creditworthiness.
Many people overlook business credit cards as a viable business funding option, especially if they have bad credit. However, business credit cards are ideal for businesses that are just starting up, because business credit card issuers will use an applicant’s personal credit score—rather than a business’s credentials—as the main decider for their approval. If you have fair or good credit, a business credit card could be a good option for you.
Business credit cards for bad credit are also available, though most are secured credit cards and prepaid debit cards.
New business ventures are essentially the riskiest bet there is for lenders. After all, you have no business history to prove your business can run smoothly, and no business credit score to prove you’re financially responsible. How can a lender know that you’ll eventually pay off your debt to them?
There are some alternative forms of financing that can offer small business startup loans with no collateral or credit check, or that might be options for business owners with bad credit.
Crowdfunding has become a popular option for entrepreneurs looking to launch a new product or service. It lets you tap into the collective efforts of friends, family members, customers, and individual investors to raise the capital you need to start your business.
Platforms like Indiegogo, Kickstarter, and GoFundMe make it easy for you to host an online campaign and reach potential backers through email and social media. Plus, there’s the added benefit of validating and refining your business concept through feedback from the masses.
Small business grants are an extremely attractive source of funding because, unlike small business loans, you don’t need to worry about paying them back.
You just need to qualify—which can be hard to do.
Federal, state, and local governments offer a wide range of grants to help small businesses start and develop. The catch is that they are typically reserved for specific industries and causes that have been identified by the government, such as scientific or medical research or conservation efforts.
If your family and friends believe in you and your business and are willing to invest in the future of your company, they might be a great resource.
But be careful. If you accept money from your friends or family, you inherently put them at risk. Make sure that they are fully aware of the risks and have a strong understanding of what you plan to do with their loan or donation.
If you’re worried about dinging your credit, there are some lenders that just do a soft credit pull—meaning it won’t affect your credit score.
If you’re afraid you have “bad credit,” make sure you understand the FICO score ranges before deciding that no lender would want to work with you. You might be underestimating your credit score or your loan options.
Lenders will typically consider your personal credit in the following tiers. Let’s see which tier your credit falls in and what this means for your business loan options:
Do startup loans with no credit checks exist? Not traditional business loans. But with a little bit of creativity, you can come up with the capital you need to start your business even if you have bad credit.