How Do I Get a Small Business Loan
With Bad Credit?
If your poor credit history is holding you back from getting financed by traditional lenders, we’re here to be the bearers of good news—it doesn’t have to. Luckily, there exists a wide range of special business financing you can take advantage of today. As the financial sector has spilled into the online world, the playing field has opened up for loans to become more readily available to those who were previously not eligible for them due to credit issues. No doubt it’s easier with great credit, but there are options to get a small business loan with poor credit. At AdvancePoint Capital, acquiring a small business loan with bad credit, no matter what level your personal FICO credit score is possible. By working with AdvancePoint Capital, you can enjoy the benefits of alternative lenders and business loans with bad credit.
Banks and credit unions do not typically provide business loans for small business owners with bad credit because they have to protect their depositors when offering bank loans. That’s where AdvancePoint Capital comes in to play for a small business with bad credit. We understand that running small businesses takes great initiative, courage, and support. You may need money for working capital, renovations, expansions — the list goes on. If one of those key elements is missing from your business, the structure can quickly fall apart. Having the opportunity to access capital through business financing for your business while struggling with bad credit may be the very thing you need to catapult your company into the next income bracket. So, let’s dive into business loans for bad credit so you can be better prepared.
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What Defines a Bad Credit Business Loan?
When your credit is calculated by a credit bureau, a FICO score is created on your credit report based on a preset algorithm. These credit scores range from 300 to 850, and your approval rates for business financing and the interest rates you are given are based on your individual score. Personal credit is about more than just a FICO Score. Business lenders look at FICO scores and have developed specific risk models, which look at what type of tradelines you have, including revolving credit like credit cards, installment loans like mortgages, car loans, and other forms of credit. The number of trade lines of credit you have, payment history length of your trade lines, and credit availability will play a role in the credit decision or a business loan with bad credit. These type of loans offer solutions for those struggling with bad credit.
Your Personal Credit Score Can Impact
Getting a Business Loan
Both traditional lenders and alternative business lenders look not only at the business credit scores of the business but also the personal credit report of the small business owner because it is a key indicator of willingness to repay behavior. Whether it’s personal loans or business financing made to small businesses, the data shows lenders that this metric is a key indicator of repayment. The interest rate of the small business loan may also be affected due to that bad credit.
If you’re credit score crazy like we are at AdvancePoint Capital, this is a source of information related to what’s evaluated by credit reporting agencies in your personal credit FICO score.
The bottom line about business loan with bad credit is that although you don’t need a minimum credit score, the better the business owner’s personal credit history, the more business financing options are available from online lenders.
Here’s a breakdown chart of the range of personal credit bureaus available by the credit reporting agencies Experian, Trans Union, and Equifax:
Do Business Credit Scores Matter?
We all know low credit scores on the personal side can impact your ability to get small business financing, but what about business credit? An alternative Lender and/or funder will consider a poor credit score vs. good credit score on the business side so establishing credit for the business is a good idea as business credit score reflects on a business creditworthiness.
Top 6 Best Financing Options for Bad Credit Business Loans
Short Term Bad Credit Small Business Loans
You can classify short term small business loans as a bad credit business loan because the lenders will consider bad credit because of the short duration of repayment. Small business loans are the most popular request from business owners seeking a working capital loan.
Merchant Cash Advances
Merchant cash advances are a bad credit business loan alternative. Although not a loan, but an advance on receivables, merchant cash advances allows for lower personal credit scores and business credit scores because the length of time of repayment is set to be shorter in duration and repayment is attached to future sales and not a fixed payments and terms.
Business Cash Advance
Business cash advance, another bad credit business loan alternative, does not have a minimum personal credit score requirement or business credit score requirement for that matter, unlike a traditional business loan. Great option to support cash flow.
Invoice financing does not consider the personal credit scores of the business looking to get an advance on an unpaid customer invoices within the set "net terms" of the invoice. The personal credit score and business credit score of the client who has to pay the invoice is evaluated. Invoice factoring is a great product to accelerate cash flow.
Equipment Financing with Bad Credit
With certain types of collateral, some equipment financing will allow a bad credit score. The business's cash flow must be in good health for financing.
Business Credit Card for Bad Credit
Business credit cards that are secured accept low credit scores. In fact in most cases there is no minimum personal credit score requirement. A cash deposit equal to you credit limit is required along with a personal guarantee are required to compensate for a bad credit score.
The fast, convenient and straightforward way to get the money you need for your business – now!
Get your quote today by filling out our simple form.
Key Considerations Funding Businesses with Bad Credit
- Personal & Business Credit (credit score may also be a consideration)
- Financial Statements of the Business
- Current Debt Obligations
- Business Bank Statements and Cash Flow Health
- Annual Revenue
- Personal guarantee or not
What Are the Pros and Cons of
Business Loans for Bad Credit?
- Access to Working Capital – Instead of being declined by traditional banks, funding can be achieved with alternative lenders for working capital or other needs. Look for higher loan approval rates for less than stellar credit.
- Credit Score– In some cases, no minimum credit score requirement. Credit score requirements vary.
- Fast Business loan Application Process – Loans are processed and funded the same day (sometimes).
- Reduced Documentation – Compared to traditional business financing, these loan options require less documentation than other business funding's, eliminating potential declines.
- Personal guarantees Required for some products, but not all.
- Interest rates will be higher than that of traditional business loans
- Fees may cost more than conventional business loans (but not always the case)
- Terms will be shorter in the duration of time to repay
- May not offer the same flexibility as other business financing.
- Business loan amounts and access to the amount of capital may be reduced
Most Common Reasons to Acquire a Bad Credit Business Loan
- Emergency loan
- Working Capital loan
- Cash Flow Shortages
- Business Expansion Loans
- Advertising, Marketing, and Customer Acquisition
- Equipment Loans or Leases
How to Avoid Being Taken Advantage of by
Business Lenders Because You Have Bad Credit
- Evaluate the expertise of business loan originators for product knowledge and experience.
- Determine a variety of product offerings. Ask yourself if the business loan originator has a diverse amount of business finance product offerings and the best business loans for your business.
- Ask how the application, underwriting, and funding processes work. How quick and efficient is the process?
- Check various reviews from independent third-party sources that don’t work directly with companies, like the Better Business Bureau and Google. Trust Pilot is not reliable because they work directly with businesses and are compensated for their reviewing services.
- Review agreements, fee disclosures, and term sheets; Always require loan originators to provide any business financing quotes an agreement, fee disclosure, or term sheet with all terms and conditions.
- Review and consider all costs or fees associated with the funding transaction.
- Consider your offers and quotes, then comparison shop. Any reputable business loan originator will give you a reasonable amount of time (typically a week) to consider any funding offer.
What Types of Lenders Provide
Business Financing With Bad Credit?
- Marketplace Business Loan Providers – These providers have the largest network of business financing options of any entity.
- Business Loan Brokers – Many brokers specialize in helping those with bad credit scores and have unique funding products to offer with an array of business loan options.
- Online Business Lenders (Fintech) – Online business lenders, also known as alternative lenders, may help provide business financing for those with bad credit. Still, the limited product lines may not offer the best choice. Always compare offers with other online lenders if choosing this route, as online lenders have varying guidelines.
- Invoice Factoring Companies – Invoice factoring is a unique option for those who invoice their clients as a part of their operation. The business owner’s credit score is NOT evaluated. The invoiced clients have their credit evaluated because that is where the collection of funds is coming from in invoice factoring. Fees are low for invoice factoring well, providing an attractive alternative for those with a bad credit score.
- Hard Money/Private Business Lenders – This type of lender can provide unique opportunities because it is common for these lenders to use personal and business collateral as compensating factors to fund.
Get Started Today
AdvancePoint Capital makes the loan application process a simple, straightforward experience.
Frequently Asked Questions
AdvancePoint Capital Blogs for
Business Owners with Bad Credit
Review our resources for business owners with bad credit.
How Does Business Credit Work? A Guide to Business Credit
High-Risk Business Loans: What Are My Options?
What to Do If Your Bank Denied Your Application for a Small Business Loan
Advice, Tips, and Warnings about a Bad Credit Business Loan
Getting business line of credit loans for business owners struggling with their credit score these days is a lot easier than it used to be. There are some exciting new loan options and other small business financing options to access capital for their businesses. These unique product structures provide small business owners access to the capital they may not otherwise get approved for by traditional lenders due to bad credit. Business loans for bad credit are available far and wide if you know where to look for business loans with bad credit. With such a wide range of small business loan opportunities, it can be difficult to find the best business loan options that work for you without help.
However, the business owner still must ask critical questions when getting business financing. Make sure you ask yourself; What is my cost vs. benefit analysis? Should I attempt to improve my bad credit first before choosing business loans for bad credit? Can I make more than it’s going to cost me for this money? What are the long-term benefits of accessing this capital for my business? Are the costs, fees, and terms worth it?
If you ask the tough questions of yourself as a business owner and are comfortable with your answers, these bad credit business loans can be an excellent source to help your business grow!
Get a Small Business Loan With Bad Credit and No Collateral
AdvancePoint Capital offers an effortless experience for obtaining bad credit business loans. Our customers love the fast, streamlined process and high approval rates that come from working with us. Bad credit scores are considered. Our marketplace consists of some of the best business lenders in the industry that specialize in bad credit. Let us help you find the best bad credit business loans.
Applying for a loan with AdvancePoint Capital is as simple as a 1, 2, 3, 4 process. Start with this online form, then fill out the short one-page business loan application, wait a few hours for your approval, and then get your money!