Many of our clients come to us asking if they can get a business loan with no credit check. The short answer is yes, you can — but should you? That’s the tricky part.
There are a lot of predatory lenders out there that will take advantage of you. They’ll offer you a loan that doesn’t require a credit check, knowing you may be unable to pay it, then charge you a higher interest rate on it or use your personal assets as collateral. That’s how they make money.
So how do you avoid those consequences but still get some relief from overwhelming business debt? Here’s what you need to know about taking out another business loan with no credit check, how to be aware of predatory lenders, and how to only take loans you know you can afford to pay back.
What Is a No Credit Check Business Loan?
As the name suggests, a no credit check business loan is a loan that a lender gives you without checking your credit score beforehand.
In most cases, these types of loans are used in situations where a business owner doesn’t have a good business and/or personal credit history. Since lenders see the higher risk in that investment, they’ll often require a personal guarantee as part of the loan, which can be problematic for your personal finances.
If you’re not sure what a personal guarantee is, it’s basically a promise you make to say that you will repay the debt. Once you provide a personal guarantee, you’re agreeing to assume personal responsibility for the balance due if your business is unable to repay it. Your own personal assets — like your checking accounts, cars, real estate, etc. — could all be at risk.
What Is the Minimum Credit Score for a Small Business Loan?
The Small Business Administration (SBA) typically requires a credit score of at least 680 for a loan. While there are lenders out there that will go lower, you should remember that the lower your credit score is, the higher your interest rate will be. Proceed with caution.
What to Watch Out for When Looking for a Business Loan with No Credit Check
If you’re looking for a business loan with no credit check, it’s important to be aware of how it could affect you in the long term. Although the prospect may seem enticing right now, there are a lot of risks that come with it. Here are some warning signs to look out for if you choose to search for one:
- Lenders who offer you loans based on future revenue. These are merchant cash advances (MCAs) — watch out!
- Lenders who want an upfront payment
- Lenders who refuse to disclose fees or are hesitant to explain them
- Extremely high-interest rates
- Personal guarantees required to get the loan
- Small business credit cards, which may be useful in the short term, but can quickly get out of control
What Are Some Alternatives to a Business Loan with No Credit Check?
Fortunately, there are some less-risky alternatives to getting a business loan with no credit check. If you’re strapped for cash, you may still need to borrow money, but there are ways to do that where you won’t need to work with predatory lenders, accept high interest rates, or jeopardize your personal assets. Here are just a few possibilities:
- Apply for a secured loan on your business equipment or assets
- Receive funding from trustworthy family or friends who support your business efforts
- Start a crowdfunding campaign
- Apply for small business grants
- Take equity investments in your startup
So, Can I Get a Business Loan with No Credit Check?
Yes, you can get a business loan with no credit check. However, it’s very important to look for the “catch.” These kinds of business loans can carry some devastating consequences if you’re not careful, potentially putting your business in a worse financial position than it already was. In most cases, it’s best to avoid predatory lenders and opt for a secured loan, a grant, or funding from investors or family instead of going into greater debt.
Struggling to get funding for your business due to overwhelming debt? Get in touch with the business debt attorneys at The Lane Law Firm. We’re passionate about guiding business owners through their tough financial situations, and we’ll help find a strategy that works best for your unique circumstances.
