When it comes to obtaining a bank loan, bad credit isn’t just a thorny issue: it’s an immovable obstacle.
For reasons that have little to do with reducing risk and much to do with generating profit, over the last decade banks have severely tightened up their small business lending requirements.
They insist on exceptional business and personal credit scores (which is an even bigger problem for some small business owners, who don’t even know that they HAVE a business credit score in the first place!). Have you checked your credit report lately?
You Have Better Options!
Fortunately, banks — and credit unions for that matter — certainly aren’t the only options.
There are several practical, affordable and strategic funding solutions available that don’t require good credit. In fact, even a discharged bankruptcy or an open tax lien typically aren’t deal-breakers.
Below, we highlight 7 types of business loans for business owners with low FICO that you can apply for right now, and likely start using to cover expenses and investments.
Bad credit business loans are financing options that do not require a high FICO score for approval.
These are relatively new types of business loans compared to traditional funding options that have become available through alternative business financing.
Business loans with low FICO scores do not offer guaranteed approval. However, they do come close, with over 90% of business owners who apply for loans accepted by National.
To increase your chances of getting approved as much as possible, be prepared to compensate for low FICO scores solid annual gross sales and time in business.
Some financing options also require that you offer some form of collateral, although National has many unsecured business loans that do not require any assets to be leveraged.
Whatever your preferences may be, National can find the perfect small business loans for any borrower, regardless of credit score. When a business needs funding immediately to pay for an emergency expense, many borrowers with poor credit turn to alternative financing for fast and easy options.
With looser requirements, flexible terms, and faster funding than loans provided by traditional lenders, small business loans make it easy to secure financing options with accommodating terms that help businesses from virtually every industry accomplish any specific goal, regardless of blemishes on credit scores and financial histories.
If you need immediate funding, and/or you constantly find yourself needing fast access to cash on-hand, then a business line of credit is the loan for you. This kind of business loan for poor credit is exactly what those who require capital to prepare for unexpected future expenses.
Need to hire extra staff to take on an unprecedented amount of customers? Cool. You need extra materials to take advantage of a sudden opportunity? Not a problem.
With lightning-fast access to funds, and incredibly flexible repayment terms, a business line of credit may be just what your business needs to grow. One of the most convenient and accommodating features of a business credit line is that you only pay for what you use.
National will work with you to determine a line of credit amount, and then you can draw upon that line of credit as you need it.
After the close of each business day, a small percentage of daily sales is automatically withdrawn and applied to the advance balance. Notably, this means that the total cost of borrowing doesn’t increase if it takes longer than anticipated to clear the balance.
According to some stats, fewer than one-third of businesses looking for funding through a traditional banking method were actually approved. Fortunately, we’ve got 5 ways to get customizable terms, and easy approval:
1. Traditional Banking
It’s unlikely, but there’s a chance you’ll still receive a loan from the bank with a low FICO score. It’s not a bad place to start, but don’t put your eggs all in this one basket.
2. Invoice Financing
If your company deals with customer invoices, and you have a number of them that are currently unpaid, you can use them to apply for invoice financing.
This can help you get the cash flow you need to get your business moving in a timely manner. And time is often of the essence.
This is another reason why more and more businesses are avoiding traditional banking; depending on the loan, it can take a bank weeks or even months to grant approval. By that time, your chance might have come and gone.
3. Alternative Lending
Most online lenders will give you an opportunity, even if your credit is a bit of an eyesore. And, as with anything else, the higher your credit score, the better the terms of the loan will be.
Alternative lenders are a great option if you’ve been turned away by the bank, or if you need cash in a hurry to seize a moment.
4. Credit Cards/Line of Credit
If you’re just starting out, applying for a company credit card or a business line of credit is often a smart way to get the cash you need for one-time purchases.
Pay on an as-needed basis, but remember: don’t borrow more than what you need. Overdrawing a loan and having to pay back interest on money you didn’t even use can derail even the most meticulous business plans.
Need some extra cash and have a great rapport with your customers? Then using a grass-roots movement to ask for contributions might be a fantastic option to raise money.
As always, help from family and friends is a bonus. If you’re going to pursue this option though, make sure to be open and honest about your needs and your goals. Social media can be a wonderful tool in this endeavor.
National makes it easy to all companies, from virtually all industries – regardless of credit score.
No more taking on enormous doc requirements to get business loans yourself. Instead, National helps take on the necessary documents for you, saving you and your business valuable time and money.
Our approval process does NOT center around credit score and extensive financial histories. All you need is:
$125,000+ in Annual Gross Sales OR 625+ FICO!
You don’t need both, just one or the other!
NO Minimum Time in Business
And NO Personal or Business Collateral Necessary
Instead of following rigid and unreasonable standards, National prides itself in its ability to provide business loans that accommodate to the individual needs of any business owner, regardless of credit.
In fact, many of the most successful business owners with low credit scores came to National for help after getting rejected multiple times by banks. Today, these businesses are among the largest contributors to National’s 90% approval rate.
Businesses with excellent sales and financial histories can have bad credit scores too, due to countless variables that may not even be the business owner’s fault – that’s no reason to deny businesses with the funds they need to grow.
That’s why we secure financing for low-FICO borrowers with the lowest rates in our exclusive marketplace of over 75+ lenders – in as little as 24 hours.
Rates: Banks and traditional lenders secure financing with unreasonably high rates for business owners with bad credit, due to their view of low FICO scores being “untrustworthy” according to their arbitrary standards.
We don’t see it like that at all. National provides business loans with exceptionally low rates. Contact a Business Finance Advisor by calling (877) 482-3008 to ask about the lowest interest rate business loans available.
Amounts: $10k-$5 Million in funds can be secured through our streamlined and expedited business financing programs.
Terms: 6 Months-10 Year terms are offered to borrowers of all credit profiles for both long and short-term business funding solutions.
If you’re wondering how to get a small business loan with a low FICO score, you should avoid the traditional loan process entirely.
Typically, the financing offers you’ll receive come with much more difficult qualification requirements, and a much longer and more complex time to access financing.
And perhaps most importantly, the lower your credit score, the worse terms you’ll receive through traditional lenders such as banks, including higher interest rates, shorter term lengths and lower amounts.
Interest Rates are Too High: Don’t ever settle for a business loan with interest rates that don’t perfectly match the needs of your business.
Term Length Isn’t What You Wanted: Ensure you’re ability to repay borrowed capital with a term length and repayment schedule that best matches your business model.
Loan Amount Isn’t Large Enough: How much do you need to accomplish your specific business goal?
Getting the amount of capital needed with poor business credit can be incredibly difficult through the channels.
However, there are many financing options that offer large amounts regardless of credit score.
Qualification Standards are Too Strict: Don’t let a lender make you think that just because you have a poor credit profile, that you can’t be approved for a business loan with terms that don’t wind up hurting more than helping your business in the long run.
Access to a solid source of capital as needed is crucial for any business to grow and expand.
Every business is unique, and so the best type of business loan that would benefit a company most varies depending on the needs and goals of each individual business.
However, for business owners with low FICO scores, the financing options that perfectly match their needs are often considered “high risk business loans” by banks and traditional lenders, and denied their chance for success as a result.
The Good News:
Alternative business lending offers new and exciting opportunities for businesses to easily secure their business loan of choice, without the traditional emphasis on risk.
Read on to find out how to secure high risk business loans, regardless of credit score and extensive financial history.
Step 1: Determine How Much Money You Really Need
Business owners often make the mistake of seeking financing options with the longest terms, and the largest loan amounts, such as SBA loans.
While this is ideal for some, for others, these options can wind up hurting more than helping.
If you are seeking funding for small, short term goals such as hiring staff, or purchasing equipment, high risk business loans may not be the best option for your business after all.
Determine how much money you really need, and consider alternative options with less risk that don’t depend on credit score to avoid paying off unnecessary amounts of capital well into the future.
Step 2: Create a Solid Business Plan
Prepare a well-thought-out business plan that clearly details how you plan on using your borrowed capital. Take your time exploring your financing options, and plan a repayment method that best fits your business model.
Proper planning, mapped expenses and repayment strategies won’t only make it easier on your business financials looking ahead, but also make lenders feel comfortable with giving you cash by showing them exactly how you plan to use borrowed funds.
Step 3: Consider Your Ability to Leverage Assets
Traditional lenders have been known to scheme their clients into leveraging their personal and business property, including their cars, home, and their businesses themselves as collateral for what they consider to be “high-risk” situations.
If you are in a position where putting your personal and business assets at risk of being taken away is not an option, consider alternative financing options that do not require collateral, such as business lines of credit, and merchant cash advances.
Step 4: Pitch Your Idea
Every business owner knows the importance of first impressions. Lenders want to know that their capital is going to be used to achieve positive results.
Pitch your goals in a way that excites lenders about how you plan to use their capital to improve your company.
Demonstrating passion for your business with a pitch that provides clear insight as to how you’re going to use your lender’s capital—and how you plan on paying it back—is extremely important when applying for high risk business loans.
Step 5: Seek Guidance From an Expert Business Financing Advisor
As a business owner, you know your company better than anyone else. While you may know what kind of business financing you’re looking for, a little help can go a long way.
Consult with a business financing advisor like those at National to get expert insight as to which type of business loans would benefit your business most. Get a second opinion, and save yourself time, money and stress along the way.
Because National knows that the same business financing options labeled as “high risk” by banks are often the types of loans that help businesses most!
Many of the businesses that National works with have been denied by banks and traditional lenders that claim the financing options they seek are high risk business loans.
Traditional lenders have been and will always be an inconvenient and all-around awful means of securing financing for business owners with poor credit. Banks have only ever had one thing on their mind when approving their clients for funding: the size of their credit scores.
According to banks, business owners with bad credit haven’t proved themselves trustworthy enough to borrow any capital.
Strange and arbitrary qualification standards regarding business credit score, financial history, and even the terms of their loans are already set far in advance, and refuse to accommodate to any business owners that do not meet those standards.
Does something about this sound horribly wrong to you? That’s because there is. Alternative financiers like National know that businesses are never defined only by their credit score.
This is especially true for businesses that have not been in business for long, as well as those that have low credit scores due to seasonal drops in revenue.
There are many contributing factors that play into a business’ credit score, and more times than not, businesses with poor credit are not themselves entirely responsible for their scores in the first place.
National believes that businesses aren’t defined by their credit scores. That’s why they approve over 90% of all applicants, compared to about 15 percent at big banks! Instead of looking purely at FICO and financial history, we approve the businesses we serve through a much wider perspective.
Unlike banks and other lenders, National’s mission is to innovate the way entrepreneurs grow by making the entire funding process faster and easier for small business owners.
National focuses on the bigger picture when evaluating the businesses of their clients as a whole, and establishes trust based on the promise of their business model.
Instead of following rigid and unreasonable standards, National prides itself in its ability to provide business loans for bad credit that accommodate to the individual needs of their clients.
In fact, many of the most successful business owners with low FICO came to National for help after getting rejected multiple times by banks. Today, these businesses are among the largest contributors to National’s 90% approval rate.
If you’re starting to consider Alternative Financing, this eBook is a must read. Business funding doesn’t have to be risky and complex. Learn how to avoid the same financing traps most business owners fall into with tips that will help you get the best deal:
National Business Capital & Services is the #1 FinTech marketplace offering small business loans and services. Harnessing the power of smart technology and even smarter people, we’ve streamlined the approval process to secure over $1 billion in financing for small business owners to date.
Our expert Business Financing Advisors work within our 75+ Lender Marketplace in real time to give you easy access to the best low-interest SBA loans, short and long-term loans and business lines of credit, as well as a full suite of revenue-driving business services.
We strengthen local communities one small business loan at a time. For every deal we fund, we donate 10 meals to Feeding America!
Megan Capobianco is the Marketing Manager at National Business Capital & Services. Megan is passionate about helping business owners along their journey - providing them with relevant content they can use in their day-to-day operations.