Bad credit is a red flag for lenders.
A weak personal credit score indicates you’ve mismanaged your personal finances in the past. Bad credit (a score that ranges from 300 to 629) is one reason business loan applications get rejected — and the approval rate of business loans from big banks was just 22.9% as of December 2015, according to a Biz2Credit report. It’s already tough to get a traditional business loan — bad credit makes it that much tougher.
But it’s still possible to get a business loan with bad credit. Below we have highlighted some of your best options, depending on your credit score, revenue and business needs.
Jump to our recommendations:
- If you have invoices and want to avoid a credit check
- If you have $25K+ in annual revenue
- For borrowers with $50K+ in revenue
- If you have $150K+ in annual revenue
- For borrowers with 530+ credit score and unpaid invoices
- For those with 500+ credit score
If you have unpaid invoices and want to avoid a credit check: Fundbox
Fundbox is a good choice for invoice financing. It advances you cash based on invoices and emphasizes your clients’ ability to pay you rather than your credit score.
To qualify for Fundbox, you’ll need to use online accounting or bookkeeping software such as QuickBooks, Xero or Wave and have a minimum of six months’ activity in one of these software applications. The company does not require a minimum personal credit score or minimum annual revenue.
- Loan amount: $500 to $30,000
- APR 44% to 66%
- Speed of approval: Instant approval with funding in 1 to 3 business days
- Read our Fundbox review and learn about the application process
-
For newer businesses with at least $25,000 in annual revenue: StreetShares
StreetShares is a good option for young businesses, as the lender only requires a minimum of one year in business and $25,000 in annual revenue. If you’ve only been in business for six months but already have $100,000 in revenue, you can also qualify. In addition, you need a minimum personal credit score of 600, and your business needs to have strong cash flow, to be eligible.
On average, StreetShares borrowers have a minimum credit score of 705, have been in business 4 ½ years, and bring in from $700,000 to $800,000 in annual revenue.
If you have at least $50,000 in annual revenue: Kabbage
Kabbage does not require a minimum credit score to qualify. The lender is a good option for business owners who need money fast for short-term working capital (such as meeting payroll and buying inventory), as the company provides a line of credit that you can borrow from and repay on an as-needed basis.
Although Kabbage does check your credit history, the company does not use your personal credit score as the primary criterion in its underwriting. It takes into account other data such as accounting, banking and e-commerce records.
To qualify, you need to have minimum annual revenue of $50,000 and have been in business at least one year. You will also need to link to a business bank account, bookkeeping software or payment platform and agree to a consumer credit check.
The company’s online application should take just minutes to complete, and if approved, you can get funded within a few days. However, you’ll pay for this speed and convenience, as the cost of Kabbage lines of credit range from 32% to 108% APR.
- Loan amount: $2,000 to $100,000
- APR: 32% to 108%
- Loan term: 6 or 12 months
- Approval time: A few minutes to several days
- Read our Kabbage review and learn about the application process.
-
If you have at least $150,000 in annual revenue: Dealstruck
Dealstruck is a good option for businesses that need to buy inventory, as the company’s inventory line of credit lets you finance 100% of your inventory purchases up to $500,000.
On average, Dealstruck borrowers have FICO scores of 660 to 700, but CEO Ethan Senturia says the lender has accepted scores in the 500 range. You also need, at minimum, $150,000 in annual revenue, and you need to have been in business for at least year.
- Loan amount Up to $500,000
- APR: 11% to 22% + prime rate
- Loan term: 6 months per draw
- Approval time Pre-qualification in minutes, offer letter in 2 to 3 days, average of 10 days to funding
- Note: Dealstruck also offers term loans of up to $250,000.
- Read our Dealstruck review and learn about the application process.
-
If you have unpaid invoices and a personal credit score of at least 530: BlueVine
If you have bad credit and lack collateral but you have unpaid invoices, BlueVine offers options for invoice financing. The lender provides an advance based on the value of your invoices, and approval is based more on the strength of your cash flow and the financial strength of your debtors than your personal credit score.
Still, for BlueVine, you will need a personal credit score of 530 or higher. See if you qualify in the box below.
- Loan amount: $5,000 to $250,000
- APR: 23% to 61%
- Loan term: 40 to 90 days
- Approval time: 1 hour to 1 day
- Read our BlueVine review.
-
If your credit score is at least 500: OnDeck
OnDeck is an alternative lender offering both term loans and lines of credit. A term loan is an option for businesses that need quick cash to expand, whether it’s to purchase equipment or make renovations, while a line of credit is best for managing cash flow and working capital.
To be eligible for OnDeck’s term loan, you need a personal credit score of 500 or higher. See if you qualify in the box below.
Once you complete an application at OnDeck’s website, you’ll get a decision within minutes and funding as soon as the next day. And here’s a credit-building bonus: OnDeck reports your payment activity to the three credit bureaus, so paying off the loan on time can help you build your credit score.
- Loan amount: $5,000 to $500,000
- APR: 9% to 98%
- Loan term: Repaid daily or weekly for 3 to 36 months
- Approval time: Decision within minutes; funding in as little as 24 hours
- Note: OnDeck also offers lines of credit of up to $100,000
- Read our OnDeck review and learn about the application process.
-
Bad-credit small-business loans: The bottom line
Bad personal credit is often an obstacle in getting business loans from a traditional bank. Alternative lenders provide options as they place more of an emphasis on the strength and operating history of your business, and worry less about your credit. As with any small-business loan, it’s important to carefully compare all of your options, weighing each loan’s terms and APR.
Find and compare the best small-business loans
If none of these works for you, or if you’d like to compare your loan options, NerdWallet has curated a list of small-business loans best for business owners. All of our recommendations are based on the lender’s market scope and track record and on business owners’ needs, as well as rates and other factors, so you can make the right financing decision.
Compare business loans
Steve Nicastro is a staff writer at NerdWallet, a personal finance website. Email: Steven.N@nerdwallet.com. Twitter: @StevenNicastro.
This post was originally published on Nov. 13, 2015
Image via iStock.
No comments:
Post a Comment