Bad Credit Small Business Loans

Financing options for small businesses with poor credit

 
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Terms & Conditions

General Acceptance

Any applications submitted electronically shall have the same force and effect as if the application bore an inked original signature(s). The above information, together with any accompanying financial statements, schedules, or other materials, is submitted for the purpose of obtaining credit and is warranted to be true, correct, and complete.

 

US Patriot Act:

To help the government fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verify, and record information that identifies each person and business that seeks a business loan. What this means for you: When you apply for a loan, we will ask for your business name, address, and Tax Identification Number. We will also ask for your name, address, date of birth, and other information that will allow us to identify you. We may also ask to see your driver’s license or other identifying documents.

 

For Loan/Merchant Services:

The Merchant and Owner(s)/Officer(s) identified in the application (individually, an “Applicant”) each represents, acknowledges and agrees that (1) all information and documents provided to National Funding, Inc. (“NF”) including credit card processor statements are true, accurate and complete, (2) Applicant will immediately notify NF of any change in such information or financial condition, (3) Applicant authorizes NF to disclose all information and documents that NF may obtain including credit reports to other persons or entities (collectively, “Assignees”) that may be involved with or acquire commercial loans having daily repayment features and/or Merchant Cash Advance transactions, including without limitation the application therefor (collectively, “Transactions”) and each Assignee is authorized to use such information and documents, and share such information and documents with other Assignees, in connection with potential Transactions, (4) each Assignee will rely upon the accuracy and completeness of such information and documents, (5) NF, Assignees, and each of their representatives, successors, assigns and designees (collectively, “Recipients”) are authorized to request and receive any investigative reports, credit reports, statements from creditors or financial institutions, verification of information, or any other information that a Recipient deems necessary, (6) Applicant waives and releases any claims against Recipients and any information-providers arising from any act or omission relating to the requesting, receiving or release of information, and (7) each Owner/Officer represents that he or she is authorized to sign this form on behalf of Merchant.(8) I consent to receive direct mail, faxes, text-messages, and e-mails sent by National Funding and its affiliates for the purposes of transmitting account updates, requests for information and notices, and (9) this request is for business and not for consumer purposes.

 

For Equipment Services:

I hereby certify: (1) the information provided is true and correct, (2) you are hereby authorized to investigate all bank, credit, and trade references, and said references are hereby authorized to release any requested information to you or your nominee, (3) such authorization shall extend to obtaining personal credit profile in considering this application and subsequently for the purposes of update, renewal or extension of such credit or additional credit and for reviewing or collecting the resulting account, (4) this information may be transmitted by us to you and by you to underwriter(s) for the purpose of granting me credit, either electronically or manually, and that by submitting this application, I take full responsibility for transmission thereof, (5) I am over 18 years of age, (6) I acknowledge my rights under the Fair Credit Reporting Act, (7) I consent to receive direct mail, faxes, text-messages, and e-mails sent by National Funding and its affiliates for the purposes of transmitting account updates, requests for information and notices, and (8) this request is for business and not for consumer purposes.

 

Text Messaging:

By providing my wireless phone number to National Funding, Inc., I agree and acknowledge that National Funding, Inc. may send text and multimedia messages to my wireless phone number for any purpose. I agree that these text or multimedia messages may be regarding the products and/or services that I have previously purchased and products and/or services that National Funding, Inc. may market to me. I acknowledge that this consent may be removed at my request but that until such consent is revoked, I may receive text or multimedia messages from National Funding, Inc to my wireless phone number.

  
The Federal Equal Credit Opportunity Act prohibits creditors from discriminating against credit applicants on the basis of race, color, religion, national origin, sex, marital status or age (provided the applicant has the capacity to enter into the binding contract); because all or part of the applicant’s income derives from any public assistance program; or because the applicant has in good faith exercised any right under the Consumer Credit Protection Act. If for any reason your application for business credit is denied, you have the right to a written statement of the specific reasons for the denial. To obtain the statement, please write to National Funding Inc., 9820 Towne Centre Drive, San Diego, California 92121. Funding amount and credit approval is subject to a full credit profile review.

On This Page:

  1. Bad Credit Business Loans from National Funding
  2. How to Get a Business Loan with Bad Credit
  3. Improve Your Chances of Obtaining a Business Loan
  4. Types of Bad Credit Business Loans
  5. Things to Consider When Applying
  6. The Best Bad Credit Business Loans
  7. What Lenders Look at on a SMB Loan Application
  8. How to Get a Better Business Loan in the Future

Obstacles for Small Business Loans with Bad Credit

Credit scores are essential to the world of borrowing. Having the right score can make securing funds simple, while the wrong score can lead to frustration. Finding business loans for bad credit or even less than perfect credit can be an uphill battle, as all too many business owners have learned. Banks and other traditional lenders are constantly looking to reduce risk. The last thing they want is to give money to an individual or business that may not be able to pay it back.

Today’s economic atmosphere is stricter than ever. That’s why the focus on credit scores has become integral in analyzing potential risk associated with a borrower. While obtaining a small business loan has always come with its own unique challenges, financial crises in recent years have put traditional lenders even more on guard.

bad credit business loanAs a business owner, having access to funding is essential. A bad credit score doesn’t stop you from needing an injection of funds to grow and support your business from time to time. For business owners with imperfect credit, hesitancy from lenders can cause real problems. On the one hand, you may need more funds to ensure your business is performing at its best. Yet on the other, you may not be able to obtain financing because you or your business is dealing with obstacles in the here and now.

National Funding understands how frustrating this can be. We work hard to provide financing solutions for all kinds of business owners, including bad credit business loans for owners with poor credit.

Bad Credit Business Loans from National Funding

We offer a variety of alternative lending solutions that can be custom-tailored to your needs as a business owner. Our financing options include poor credit small business loans for owners seeking working capital. Regardless of low FICO scores, National Funding’s working capital loans for poor credit feature simple paperwork, fast turnarounds, and fixed payments.

Contact National Funding today to explore your options for bad credit small business loans.

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Why Your Credit Score Matters

Even though you're seeking funding to support a business, most lenders will consider your personal credit score when evaluating a small business loan application. Your credit score is determined by a variety of factors, known as the 5 C’s of credit: character, capacity, capital, conditions and collateral. These characteristics examine how reliable you are at repaying your debts, how many payments you’ve made on time, and your debt-to-income ratio, among other considerations. While there are several credit scoring models that may be used to determine your creditworthiness, the most common model is the FICO score.

Here are the different FICO credit score ranges:

  • Exceptional (800 - 850)
  • Very good (740 - 799)
  • Good (670 - 739)
  • Fair (580 - 669)
  • Poor (300 - 579)

The term “bad credit” usually refers to a FICO score of 300 - 629. A low FICO score is a common reason why traditional lenders reject small business loan financing. However, even if your score falls within a lower range, you may be able to secure a bad credit business loan from an alternative lender that focuses more on where your business is going in the future than on what’s influenced your credit score in the past. National Funding can approve some applicants with credit scores as low as 500 for direct loan borrowers and 475 for renewals.

See if you qualify now.

How to Get a Business Loan with Bad Credit

You can obtain the capital you need to develop and grow a successful business, even if you have bad credit. In fact, there are essentially only three steps to securing a small business loan with bad credit:

  1. Know Your Personal Credit Score

    Personal and business credit scores help lenders determine how risky it may be to lend money. Since these scores can influence your ability to acquire funding for your business, knowing your credit score before applying for a loan can help you determine the best financing options to explore.

  2. Research Your Options Based on Eligibility Requirements

    For each type of financing, there are specific requirements you'll have to meet to get approved. Traditional business loans are often based on the following factors:

    • Personal credit score
    • Years in business
    • Annual revenue

    Research the requirements for each type of small business financing you're considering to determine which bad credit small business loans give you the best odds for approval.

    Talk to a loan specialist at National Funding for personalized advice on your financing options.

    Apply Now

  3. Choose the Best Option for Your Business

    There are a broad range of financing options for business owners with bad credit outside of traditional loans. When exploring alternative financing options, consider not only the eligibility requirements and repayment terms, but also the lender’s reputation. Read borrower reviews and speak with service representatives. Make sure that your lender is committed to supporting you in your journey to greater success and has a proven track record of satisfied customers.

Improve Your Chances of Obtaining Business Loans for Bad Credit

Applying for a small business loan requires preparation, especially if your credit isn't ideal. Before applying, consider taking a few steps to improve your chances of approval and secure the best terms possible for your small business loan. There are two ways you may be able to improve your chances of getting a small business loan with bad credit.

  1. Provide Collateral

    Lending money to a small business is inherently risky. Even for an extremely qualified borrower, an unexpected downturn in business can leave the owner unable to repay a loan. One way to increase your chances of getting funding you need to grow your business is to provide collateral. There are two options:

    • Invoice financing. If you have unpaid customer invoices, some lenders may be willing to approve your loan based mainly on the value of your invoices. With invoice financing, unpaid invoices serve as collateral for your loan. The financing company advances a certain percentage of each invoice and charges a fee for service.
    • Equipment financing. If your goal for taking out a loan is to secure funding for new equipment, you may consider applying for equipment financing. With this type of collateral, the equipment you finance serves as collateral for your loan. If you default on your loan, the lending company will seize the equipment to recover their losses, but your personal assets will remain protected.

    Ask a loan specialist which type of financing is right for you.
    Apply Now

  2. Use a Co-Signer

    In this scenario, another person agrees to take on partial responsibility for a small business loan by “co-signing” the agreement. A co-signer is typically an individual with a favorable credit score or steady source of income who can handle making loan payments if the primary borrower becomes unable to.

Types of Bad Credit Business Loans

Aside from the fact you have to use business loan funds for business-related needs, business loans are very similar to personal loans. Types of business loans for poor credit offered by alternative lenders include:

Short-Term Loans

A short-term business loan provides a lump sum of capital that the borrower agrees to pay back over a fixed amount of time on a specific payment schedule. Each payment the borrower sends to the lender includes the principal amount plus any interest owed for the period.

Short-Term Business Line of Credit

When a lender issues a short-term business line of credit, the borrower may access funds on a continual basis up to a specified approved amount. Like a credit card, the borrower is only charged interest on the open balance.

Collateralized Loans

If you secure your bad credit business loan with collateral, you’re giving the lender the right to seize collateral to recover their losses if you’re unable to pay your loan back. The loans are also commonly referred to as secured business loans. They are usually secured with invoice or equipment financing.

Merchant Cash Advances

If you’re a small business owner in need of quick capital, a merchant cash advance offers a lump-sum loan in exchange for a percentage of future credit and debit card receivables. While a merchant cash advance is often easy to apply for, the option may not be suitable for every business. Merchant cash advances tend to have steeper interest rates, making them one of the more expensive financing options over the lifetime of the loan.

Working Capital Loans

Working capital loans are used to finance everyday business operations like wages, inventory, taxes and a range of other costs that keep your business going day-to-day. Unlike some other types of loans, they are not used to pay for investing or other long-term assets. Working capital loans from National Funding can provide your business up to $500,000 to support your needs right now, quickly and with minimal paperwork.

See how much funding you qualify for.

Apply Now

Things to Consider When Applying for a Small Business Loan

If you’re looking for a business loan and have bad credit, there are several factors that may influence your approval odds as well as the terms of your loan. Before applying for a bad credit business loan, here are a few things to consider.

The Relationship of Personal Credit to Business Loan Approval

If your business has no credit history, traditional lenders will use your personal credit score as a numerical representation of your overall creditworthiness. Your personal FICO score will be used exclusively to determine your eligibility for a small business loan. For that reason, it’s a good idea to work on improving your personal credit score so you’ll have plenty of options when applying for a small business loan.

The Relationship Between Credit Scores and Interest Rates

Business owners with great credit generally receive the best interest rates on their loans. If your personal or business credit score is low, there’s a greater chance your loan will include a higher annual percentage rate (APR), which describes the interest you pay for a year.

The good news is that securing a small loan with a manageable APR can help improve your credit score over time. If you are approved for small business loans for bad credit, each on-time payment can help raise your credit score while providing the financing you need to run and grow your business.

Online Lenders Vs. Traditional Banks

Traditional lenders like banks and credit unions tend to have strict policies and eligibility requirements for loan approval. They also tend to be slower and require more documentation. Whether you have above-average or less-than-perfect credit, here are just a few benefits of alternative and online lenders compared to traditional lenders:

  • Faster turnaround times
  • Less documentation required for approval
  • Faster access to funds, if approved
  • Flexible terms that meet your specific needs as a borrower
  • Higher approval rates

Age of Business

Traditional banks tend to lend to well established businesses to reduce their risk. As a result, younger businesses may have a harder time meeting a bank’s strict lending standards. Alternative and online lenders, on the other hand, actively cater to underserved business owners. National Funding offers financing for businesses that have been in operation for at least one year or, in some cases, as little as three to six months.

Other types of lending solutions young businesses may consider include:

  • Business credit cards. These cards can be a practical solution for building your business credit score while having access to extra capital. To obtain one, you'll need a federal tax ID number and business bank account.
  • A secured personal credit card. Secured cards can help you build better personal credit before applying for a loan.

Business Loan Costs

Beyond the principal amount of a loan, small business financing terms often include additional costs you must consider. By keeping loan costs to a minimum, you’ll have more capital to reinvest in your business.

Small business loan costs often include:

  • Annual percentage rate. Your APR is the interest rate you pay on your loan annually.
  • Down payment. While down payment requirements vary between lenders, the average amount a borrower will need to invest when taking out a loan is 25%. Some loans allow you to use collateral as your down payment.
  • Factor rate. Typically used for merchant cash advances, a factor rate determines how much interest a borrower will owe. A factor rate is measured by business stability, average monthly profits, type of industry, and years in operation.
  • Origination fee. An origination fee is a charge for processing a new small business loan. Some lenders waive the origination fee, while others incorporate the fee into the overall loan balance.
  • Underwriting fees. These fees are collected by the underwriters who review, verify, and approve the information provided in a small business loan application and recommend terms for financing, if approved.
  • Closing costs. These fees include costs associated with finalizing a loan, such as loan-packaging fees, business appraisals, or recording fees.
  • Other fees. Additional fees associated with a small business loan may include check processing fees, prepayment fees, and late payment penalties.

The Best Bad Credit Business Loans for Your Business

A variety of factors contribute to your eligibility for a loan. Here are some general benchmarks that may contribute to your loan approval:*

  • New businesses. If you’ve been in business for less than a year, it may be hard to find a loan, even if you have good credit. Potential financing options include startup financing, secured personal credit cards, and business credit cards.
  • Owners with a credit score under 550. With a credit score between 500 and 550, you might have difficulty applying for certain types of loans. However, if your business is doing well, alternative lenders may use factors other than your credit score to determine your eligibility.
  • Owners with a credit score over 500. With a credit score between 550 and 620, you could qualify for a short-term loan or even a medium-term loan if your business is doing well.
  • Owners with a credit score over 600. If your credit score is 620 or above, you may qualify for a medium-term loan. With a score over 650, you might be able to qualify for a Small Business Administration loan, too.
  • Owners with a credit score over 700. If your credit score is over 700, you're likely in a good position to qualify with most lenders, including direct and alternative lenders as well as the Small Business Administration.
  • Businesses with large unpaid invoices. Some alternative lenders allow you to turn unpaid customer invoices into instant capital. Invoice financing lenders weigh the strength of your business over your credit score.
  • Businesses with new equipment needs. If your business would benefit from a new piece of specialized equipment, equipment leasing or financing may be a good fit.
  • Very small businesses. While you’re building a business, consider financing options like business credit cards, secured personal credit cards, and startup financing.

*These benchmarks do not represent actual approval odds for financing. National Funding does not consider credit score in our bad credit loan decisions, instead basing approval on time in business and annual gross sales.

Compare Options to Determine the Best Loan for Your Needs

Your decision to obtain financing for your business is important. There are many factors to consider when evaluating your different loan options, including:

Short-Term vs. Mid-Term Repayment

A short-term loan typically needs to be repaid within one to three years, while a mid-term loan usually has a two to five-year repayment period. The eligibility requirements, interest rates, and loan amounts of each type can vary. Carefully think about what repayment time frame works best for your needs as a business owner, and the repayment terms' impact on the overall cost of any loan you accept. For example, the repayment terms for short-term working capital loans from National Funding will not exceed 12 months for your first loan, with renewals extending up to 15 months.

Interest and Fees on Open Balances

Assess how much interest and fees you’ll be charged on open balances. If you take out a longer-term loan, the amount you have to pay each month may be lower. However, you might wind up paying more in the long run. If you take out a short-term loan, you’ll probably have higher payments but less total interest on the loan.

Loan Limits

If a lender doesn’t extend financing in the amount your business needs, consider turning to creative funding sources. Or, look for ways to cut costs and reduce the total amount you need. Even if you obtain a loan for less than you originally wanted, securing an initial loan can help you build better credit and potentially secure more funding with a second loan or renewal later on.

What Lenders Look at on a SMB Loan Application

What additional factors matter to a lender besides credit scores? Banks tend to request more information, while online and alternative lenders require less. At National Funding, for example, we ask for limited information in order to provide better speed and service. We generally look at a business's annual revenue, cash flow trends and credit history of both the business and the owner.

What additional factors matter to a lender besides credit scores? Banks tend to request more information, while online and alternative lenders require less. At National Funding, for example, we ask for limited information in order to provide better speed and service. We generally look at a business's annual revenue, cash flow trends and credit history of both the business and the owner.

Annual Revenue

Your business’s annual revenue is one of the most important eligibility factors for bad credit small business loans. If you’re approved for a loan, the amount you’ll qualify for will usually be around 8% -12% of your business’s annual revenue.

Profitability

Even if your annual revenue is high, some lenders will also want to know if your business is profitable. Your business doesn’t necessarily have to be profitable in order to qualify for a loan, but your chances of approval could be increased if it is. If your business has demonstrated significant growth in the last 3 months or more, it could improve your chances of securing a loan even more.

Current Debt Obligation

If you already have a business loan, you may have difficulty obtaining another one, especially if your original lender placed a UCC lien on your business. For some lenders, approving you for a loan even if you already have one with another lender won’t be an issue. However, there are risks to your business and credit if you take on more debt than you can realistically and responsibly pay back.

Cash Flow

Your ability to manage the cash flow of your business may be an important factor to lenders. After all, every lender’s primary concern is your ability to make loan payments. By demonstrating that your business makes and has enough money to afford payments may improve your chances of qualifying.

Credit History

Most lenders will examine your credit report to determine if you’ve ever had a bankruptcy, foreclosure or another red flag. But remember, poor credit doesn’t automatically disqualify you from getting the money your business needs, especially with lenders like National Funding who offer small business loans for bad credit.

Business Plan

National Funding does not require it, but some lenders may want to review your business plan to better understand your business. Business plans may show lenders a variety of things that set your business apart, including:

  • unique value propositions
  • marketing strategies
  • leadership team
  • revenue and profit models

Your business plan should be presented in concise yet detailed terms that clearly explain the amount of funding you need and why it’s required.

How to Get a Better Business Loan in the Future

To qualify for a loan with better terms, you need to demonstrate that you’re a responsible borrower. If you’re denied a small business loan or think you’ll need to borrow again in the future, use these ideas to improve your chances of obtaining a loan with better terms the next time you apply.

Improve Personal Credit

Business Credit Reports Your personal credit matters, even if you’re applying for a business loan. If you have less-than-perfect credit, get proactive about improving your score by following these best practices:

  • Always make payments on time
  • Keep balances below 30% of your total credit limit
  • Don't open too many new lines of credit at once
  • Actively monitor your credit score and dispute suspicious or false activity

In the United States, three major credit reporting bureaus Experian, Equifax, and TransUnion offer a range of free services to help you monitor, manage, and improve your credit score. Visit each of their websites to check your current credit report and ways to improve it.

Establish and Build Business Credit

Building your business’s credit is one of the best ways to improve your eligibility for a business loan. Establishing business credit can take some resources and time, but when done properly, it pays off big time.

Establishing business credit usually involves incorporating your business, getting a federal tax ID number, opening a business bank account, and securing various lines of credit for your business. Even if you don’t qualify for a small business loan, you may still qualify for a business line of credit or a bad credit business loan, which could improve your chances for a loan over time.

Like all credit, you want your business's credit to remain in good standing. Follow the best practices for improving personal credit above to maintain a strong business credit score, too.

Assess Your Business Plan

While you’re building better credit and working to secure funding, you may find you need to lower the amount of capital you request to improve your chances of approval. If so, reassess your current business plan to look for areas you can cut costs, such as using social media to market your business or building your own website.

Prove Your Creditworthiness

Consider building a team of experienced business partners to boost your creditworthiness. Lenders may take the total personal income and collateral of each business owner into account when determining your eligibility for a loan. You can also collect reference letters from current creditors and vendors to demonstrate your trustworthiness and ability to repay financial obligations.

Get Creative with Funding Options

Even if you’re approved for business loans with bad credit, you may not secure the full amount you need to grow your business as quickly you'd imagined.The good news is that after you secure and pay off your first business loan, your improved credit score may help you qualify for business loans with higher amounts or better terms in the future.

If you need additional funding to realize your vision for the future even sooner, you may consider asking family, friends, or private investors to invest in your business. You can also seek funding through a crowdfunding platform like Kickstarter or GoFundMe. As with all financing options, you must convince others that your business is a good investment and make sure you understand the full terms and costs associated with any creative funding sources you consider.

If you’re looking for a bad credit small business loan, compare your options with National Funding. See how much funding you qualify for by filling out our brief online form today – our quick application pulls a soft credit inquiry so your current credit score will not be impacted. A loan specialist will reach out to discuss your options and help you find the right small business financing options in as little as 24 hours.

Take your business to the next level with support from National Funding:

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FAQs:

Yes! Although getting approved for a business loan is easier with great credit, there are options to get a business loan with bad credit. If you have bad personal credit, you may have to look beyond traditional lenders and consider alternative lenders. Alternative lenders usually have bad credit small business loan options for business owners with less than stellar credit.

Generally, the higher your credit score, the more likely you are to be approved for a loan. However, there are options for business loans with bad credit. For example, some lenders may approve you for a loan with a Poor Credit Score (300-579) if your business is profitable and you have a high annual revenue.

Your personal credit may be affected by a business loan. This is usually dependent on the structure of your business and whether or not you have personal responsibility for the loan. Reasons you may be personally responsible for a loan include signing a personal guarantee to pay back the loan if the business cannot or if you used a personal credit card or funds to fund the loan.

Not always! Many small business owners associate getting a loan with weeks of applications, sharing financial documents and waiting to hear if they’ve been approved. This is typically the case with traditional lenders. Many alternative lenders offer a quicker turnaround time for the application process. At National Funding, our simple application process is completed online and you can even be approved in as little as 24 hours.

With so many different small business loan options, many small business owners can qualify for some types of business funding. Even if you have poor credit, you may be able to get approved for a bad credit small business loan. Speak with a Loan Specialist today to learn about National Funding’s small business loans for bad credit.

Each lender will have different requirements for a small business loan. Traditional lenders may require a good to excellent credit score, collateral and your business plan. On the other hand, alternative lenders tend to require less for a small business loan. At National Funding, we provide a simple, easy online form to apply for a business loan and customize our loans to meet your needs.

To open a business bank account, you generally need personal identification, business documents like a business license or articles of incorporation and an Employer Identification Number (EIN) or other tax ID.

Yes! Your credit score shouldn’t affect filing for an LLC or obtaining an Employer Identification Number.

Many Small Business Administration (SBA) loans require collateral for approval. If your business doesn’t have the required collateral, you can personally guarantee the SBA loan. However, this can complicate your business and personal finances. If you don’t have the required collateral for an SBA loan, consider looking at other financing options, such as a bad credit small business loan from an alternative lender.

There are several types of Small Business Administration (SBA) loans offered by lenders, and some of them do not require a down payment. The majority of SBA loans, however, do require a down payment in addition to collateral. Most SBA down payment requirements are between 10% and 20%.

Unlike a loan, a small business grant does not need to be repaid. Sound too good to be true? It’s incredibly difficult to qualify for a small business grant. In fact, the government doesn’t offer grants for starting a business, paying off debt or covering operational expenses. The few businesses that do qualify for small business grants are usually heavily involved in scientific research and development. Most small business owners should look for a favorable small business loan instead of a grant for things like paying unexpected bills or expanding to a new location.

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