Getting a Business Loan with no Credit

You’ve made the leap to running your own business. Even if you have bad or no credit, you should be congratulated. After all, small businesses are the backbone of the American dream. Almost 1 in 10 Americans own a small business and over 120 million people in the U.S. work for a small business. So small businesses are as American as apple pie, baseball, and the Fourth of July rolled into one.

However, if you don’t have credit, running a small business can be nearly impossible when you need funding. Banks only want people with sterling credit scores. Even then, they will make you pull together a long-winded business plan and go through rounds of meetings and committees, only to turn you down.

So where can you turn? Building credit can take a long time, and even if you have twenty years of good credit it will never seem like enough.

You need to know how to get a business loan with no credit. This starts by looking at alternative sources of funding. These are lenders who offer programs for businesses who are not eligible for bank financing. Common options include merchant cash advances, working capital loans, business credit cards, and micro loans. All of these are ways to receive loans with little to no credit history.

Another way to help your business get financing, even if you don’t have a credit score, is to register with commercial reporting agencies such as Equifax or Dunn& Bradstreet. Next, make sure you pay your bills on time. This will show that you and your company can be trusted.

For many small businesses, they don’t have the time to build up better credit because they need money today. Cash is king and alternative lenders are increasingly becoming the first choice for small businesses around the country.

One of the most popular alternative lending options is the Merchant Cash Advance. This is a short-term loan paid in a lump sum and is based on a portion of your company’s future credit card sales. Some of these companies will approve your loan within 24 to 48 hours. While the interest rates are higher than credit cards, they can be a useful option when you need cash fast.

If cash advances are not for you then you can also look for a revolving line of credit. In the case of someone without a credit history, you will probably need a guarantor or you can use business assets, like inventory, as collateral.

These are often called inventory loans because they are specifically designed to help small business owners buy inventory. These loans can be extremely useful when you are just getting started and depending on the industry, some lenders are more than willing to back your inventory purchases.

However, inventory loans are best suited for businesses where the inventory is easy to turn into cash. That means it can be sold quickly. So if you are sitting on a lot of dead stock, then this might not be the right option for you.

Another option is a working capital line or loan. These tend to be broader in scope than inventory loans and some lenders are more flexible when it comes to your credit history. All you will need to show are your bank statements. So if your business has decent sales, this might be a good option for you.

One thing to remember when you are looking for a working capital loan is how you manage your receivables. That is how you are paid by your customers. You will want to clean up any slow payments or uncollected invoices before seeking a working capital loan.

In many ways, collecting slow payments or unpaid invoices can be just as good as a loan. Even though it was owed to you, your customers did not pay. So it is your best interest to get paid as much as you can, as fast as you can, before seeking alternative funding options.

As you see, there are a lot of options when it comes to getting a business loan with no credit. Reach out to a number of companies which specialize in this area, and choose the right loan to meet your needs.