Easy Business Loans and Your Credit Score
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Last updated 03/15/2024 by
Chonce MaddoxGetting your business off the ground or expanding your current operations can be difficult when you don’t have the money.
Business loans offer entrepreneurs the opportunity to cover start-up and expansion costs when they don’t have enough reserves to fund the costs on their own.
Obtaining a business loan can seem tricky, but the more you understand how it works, the smoother the process will be.
In this guide, you’ll learn everything you need to know about qualifying for easy business loans and funding your business.
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Know your credit score
Your credit score is an important factor when considering whether you qualify for certain types of business loans. Some lenders may ask to see your business credit score along with your personal credit score.
Your personal credit score ranges from 300 to 850. The higher it is, the better your chances are of qualifying and receiving a competitive interest rate on your loan.
You can also check your full credit report for free with sites like Credit Sesame and AnnualCreditReport.com.
Your business credit score ranges from 0 – 100, and it is based on trade credit, which is when a supplier allows you to buy something up front and pay for it later. You can check your business credit score with sites like Experian or Nav.
It’s important to know what your score is and verify that all the information on your credit report is accurate before you consider applying for a business loan.
Even if your credit score is not great, you still have some options when it comes to finding a loan, which we will explain shortly.
Understand the lender’s requirements
Loan requirements vary by lenders, so you want to make sure you take the time to understand the qualifications.
Some more traditional lenders, like banks, may require you to be in business for some time or produce a specific amount of revenue to qualify.
Other lenders allow you to get short-term loans based on how many outstanding invoices you have.
To apply for a loan, each small business needs to have their financials in order, which typically includes showing proof of income along with your business and personal tax returns”
Bryan Doxford is Chief Lending Officer at Excelsior Growth Fund (EGF), a New York state non-profit lender offering online business loans. He says that a business owner should have a strong business plan and a proven ability to repay business debts.
“To apply for a loan, each small business needs to have their financials in order, which typically includes showing proof of income along with your business and personal tax returns,” Doxford adds.
Business loan requirements
Before you apply for a loan, you want to understand each lender’s requirements for your:
- Business status (how long do you have to be in business to get a loan?)
- Credit score (will you also have to provide a business credit score?)
- Tax forms
- Annual revenue and cash flow
- Personal and business bank statements
- Articles of incorporation
- Business plan
- Collateral (are you required to put any assets up for collateral to secure the loan?)
Some lenders may require a business plan, especially if you are just starting out, so that they can learn more about your business and why you need a loan.
“One of the key ways that a small business owner can demonstrate to their lender that they’re a good risk is by having a plan,” Doxford says. “Lenders need to understand where you’ve been, what your current need is, and where you’re going.”
Where to find a loan
Traditional banks may be your first stop when it comes to finding a lender for your business loan, but many of them have stiff requirements.
As a brand new business owner with no history or proven revenue, you may have a hard time securing funding through a bank.
As an alternative, you can try obtaining a business credit card or working with an online lender. Doxford says his company doesn’t solely focus on credit when considering applicants.
“While credit is important, so is a proven track record. So, I look carefully at the business plan to make sure they have sized the market properly and have realistic revenue projections to ensure they can pay back the loan,” he said.
If you’re looking for an online business loan with no credit check, consider lenders like Fundbox or PayPal Working Capital, which take into account cash flow and sales when determining eligibility.
The U.S. Small Business Administration (SBA) offers small business loans from $500 to $5.5 million, but SBA lenders typically provide secured business loans that require collateral. Collateral is an asset — such as equipment, real estate, or inventory — that can be seized by the lender if you are unable to make payments on your loan.
Unsecured loans don’t require collateral but rely more heavily on your credit rating. If you have bad credit, you can try options like crowdfunding, peer lending, microloans, or even grants.
Start your search
It’s best to compare traditional and non-traditional lenders and their requirements to ensure you’re making the right decision.
Start by checking out SuperMoney’s business loan review page. You’ll be able to compare various lenders’ rates and terms side-by-side to find the best one for you.
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