If you’re looking for business funding but have bad credit, don’t worry – you’re not alone. A lot of business owners find themselves in this situation. The good news is that there are a few options available to you. In this blog post, we’ll discuss some of the best business funding for bad credit options available to you. We’ll also talk about how to improve your chances of getting approved for a loan, and what to do if you get denied. So, whether you’re looking for a small business loan or need money to start a new venture, keep reading!
Can You Get Business Funding With Bad Credit?
Yes it is possible to get business funding or a business loan when you have bad personal credit or no business credit. Lenders will have different qualifications they look for to consider about you and your business than just your credit score. These are some of the qualifications lenders will be looking for:
- What is your annual revenue?
- How long have you been in business?
- How much cash flow do you have?
- What types of collateral can you provide?
While these are important factors to get business funding lenders will also be looking at your personal and business credit scores. If you have bad personal credit you can start building business credit to get better funding options for your business.
Is your credit really bad? Before you apply for funding you will need to know what your credit score is.
How To Check Your Personal Credit Score and Business Credit Score?
To check your credit scores you will need to pull your credit reports. These credit reports will show what your credit score is as well as show all of your details such as your personal information, your tradelines, how much debt you have, when you opened accounts and so much more.
To access your free credit report once a year you can go to annualcreditreport.com and get all three of your personal credit reports. For a more in-depth credit score and credit report that 90% of lenders use, get your credit report from myFICO.
To access your business credit report you can go to Dun & Bradstreet who produces a PAYDEX score that analyzes your business credit similar to the FICO Score for your personal credit. You can also access your business credit through Nav or Tillful. With Tillful it offers free real-time transaction data from your bank and credit card accounts.
So what’s the difference between personal credit and business credit?
Personal Credit vs Business Credit
Your personal and business credit scores are very different and are calculated differently. We will go over what is a personal credit score and what it is used for and what your business credit score is and what it is used for in order to get funding.
Personal credit is based on your social security number and is reported to the three credit bureaus– Experian, Equifax and TransUnion. Your personal credit score is a three digit number that is used to measure how risky it would be to lend you money.
The most used credit score is the FICO Score and the FICO which ranges from 300-850 points. A bad FICO score is considered to be anything under 600. Your personal credit score is important because it’s what lenders look at when you’re applying for a loan or line of credit.
With personal credit lenders will look at:
- how well you pay your credit cards and personal loans
- how much debt you have on your credit cards
- how many tradelines you have
- how old is your credit profile
👉 If you choose to fix your credit on your own you can access the best credit repair software for removing collections and inquiries here 👈
Business credit doesn’t require a personal guarantee and can be used to get funding without having your personal assets at risk. Also business credit has its own scoring system called “Paydex” that’s issued by Dun & Bradstreet.
Paydex ranges from 0-100. There are also two other business credit scores that are used by lenders other than the Paydex. These credit scores are Intelliscore PlusSM by Experian Business and FICO Liquid Credit Small Business Scoring Service.
These scores are used by banks and other creditors to determine how likely a business will pay its bills on time. This can be helpful if you’re trying to get approved for funding but have bad personal credit because it doesn’t take into consideration your past financial history as an individual when determining eligibility.
Benefits Of Business Credit
- Business credit will not report to your personal credit score unless you need a personal guarantee.
- Credit increases happen much faster with business credit
- Your credit limits are higher and will increase a lot faster than any personal credit cards will.
- You will not be penalized for using your business credit or loans as long as you are making payments on time while personal credit can be lowered when you have too much debt on your credit cards or take out too many loans.
- You’ll be able to get better rates and terms if you do this, which will ultimately save money in the long run since it’s cheaper now than later on down the road when interest rates increase or other factors change such as interest rates .
The takeaway here is to always build your business credit first before applying for any type of funding.
How To Build Business Credit
Before you apply for any funding for your business you will need to follow these steps to build your business credit:
- Set up a separate business bank account. You can setup a business checking account with bad credit or no credit at all. Here is a list of business checking accounts. Most lenders will ask for at least 3-6 months of business checking account statements so set up your business checking account as soon as possible.
- Establish at least two business tradelines with vendors and suppliers who report to the major commercial reporting agencies such as Experian, Equifax & TransUnion (D&B). Tradelines are accounts of vendors or suppliers that offer credit terms to customers on their products. Apply for business tradelines and vendor accounts here.
- Use a business credit card on small purchases and pay off the balance in full each month to avoid interest charges.
It’s important to note that some lenders and business bank accounts will require you to have an EIN before you apply so make sure to incorporate your business and setup an EIN.
Learn how to form your business with INC Authority.
If your business is relatively new or you have bad personal credit, then getting conventional funding may be an issue for you. Fortunately there are alternative finance companies who offer small business loans and lines of credit with no personal credit check. They base their approval on your business’ cash flow and not the personal credit score of any individual.
Related: How Can I Get A Loan With Bad Credit
Best Business Funding Options For Bad Credit
If you’re still wondering “how do I get approved for funding with bad credit?” then there are many different types of business funding available, so it’s important to do your research before applying. If you’re looking for a business loan with bad credit, there are several options to choose from:
Fund & Grow is a funding service that helps small businesses access business credit lines and other types of financing. They work with their clients to help them qualify for up to $250,000 in unsecured business credit lines from banks and financial institutions across the nation. Since they have started, Fund & Grow as funded over 28,000 businesses with over $1.2 billion dollars of growth capital.
What Fund & Grow Offers:
- Up to $250,000 of unsecured funding
- $100,000 of corporate credit that boosts your Dun & Bradstreet corporate credit rating.
- Utilize the funding for any of your business needs such as inventory, software, tools, business vendor services, sending wires to purchase investment properties.
- Their lines of credit do not report to your personal credit, risk collateral or assets or give up equity in your business in order to get business credit and funding.
- They will work with business who have bad credit and help you build your credit score.
- Works for any type of business even if you are just starting your business and you do not need to provide tax returns or profit statements to apply.
- 12 months of one-on-one business coaching
- Set up your business entity with tax ID and LLC creation.
- 60-day money back guarantee
Tillful is a company that helps small business owners build business credit and unlock capital and funding. As we mentioned above Tillful offers you a free business credit score and allowing you to analyze your business credit data but they also help you apply for funding.
With Tillful funding you can apply online by submitting your business information. From there they will instantly match you with a personal lending advisor.
The lending advisor will give you a quote for how much you qualify for and personally walk you through the application process. You will then compare your funding options and lock down which funding works best for your business.
The types of funding you can get for your business through Tillful include:
- Merchant Cash Advance – Best for businesses with no business credit or poor credit. These are quick cash that is repaid with a percentage of daily sales made by credit and debit cards. If you need funding right away these is the most common type of funding.
- Line of Credit – allows you to borrow cash as needed. These are best to resolve cash flow short falls or temporary and seasonal fluctuations.
- Term Loan – loans from a traditional banks that have amounts under $500,000 which is best for established businesses.
- Equipment Financing – get funding for purchasing equipment for your business such as commercial trucks, or sewing machines basically whatever big purchases you need to make regarding equipment for your business. Equipment financing allows you to use the equipment as collateral.
BlueVine offers a business line of credit issues by Celtic Bank. They offer credit lines up to $250,000 at rates as low as 4.8%. The funds are available on demand allowing you to draw the funds when you need them. You only pay for what you use as they don’t have account maintenance fees or prepayment fees. Pay back the line of credit with fixed monthly or weekly payments over 6 to 12 months.
To apply for BlueVine you will need to have:
- 600 FICO score
- 6 months in business
- $10,000 in monthly revenue
- year to date bank statements
OnDeck offers small business line of credit up to $100,000. They offer a fast and easy online application process with no paperwork required and a 12-month repayment term that resets after each withdrawal. Make one weekly payment on all the withdrawals. There are no prepayment penalties and helps you business your business credit.
To apply for OnDeck you will need a personal FICO score of 600 or greater, be in business for one year, have an annual gross revenue of $100,000 and have a business checking account.
SBA Microloans are for small businesses that need less than $50,000. The loans are made through nonprofit microlending organizations approved by the SBA.
The application process is relatively easy with a quick online form and you can receive your funds in as little as seven days after approval. repayment terms vary from six to 60 months.
Fundbox offers fast and flexible lines of credit up to $150,000. Repay your line of credit over 12 or 24 weeks. Use the funds to hire staff, advertising or marketing, purchase equipment or more.
To apply for Fundbox you will need:
- 600 or higher personal FICO Score
- $100,000 in anuual revenue
- A business checking account
- 6 months or more in business
- Be based in the US
There are a few things you can do to increase your chances of being approved for a business funding with bad credit. One is to have a good credit score and demonstrate that you’ve been responsible with debt in the past. You can also offer collateral as security for the loan.
If you don’t have a good credit score or you can’t offer collateral, you may want to try getting a business loan from an online lender. These lenders are typically more forgiving when it comes to credit scores, and they may be more likely to approve loans for businesses that have been in operation for less than six months.
Another option is to get a business credit card. This can help you start building your business credit history, and eventually lead to being approved for a small business loan. Find the best Business Credit Cards here. Business credit cards and business tradelines allows you to make purchases for your business while helping to build your business credit. The more credit you use the more funding you will be able to access to grow your business.