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Financing options for small businesses with poor credit can be challenging to find, but bad credit business loans are available from many different lenders.
These loans are designed specifically for companies that have had financial problems in the past and may not qualify for traditional bank financing. If you need money fast, you should consider a bad credit business loan from a reputable online lender.
Other options are available if you want a loan, but your bank is unwilling to help you because of a low credit score. Alternative lenders – including credit unions, online banks, and peer-to-peer lending platforms – have been growing in popularity to provide access to credit for people who might otherwise be unable to get it.
These alternative lenders’ growth coincided with the rise of the “gig economy” and pandemic, where more are self-employed. The gig economy is making it easier for many people to start businesses.
The downside is that these companies often don’t have the resources to get loans.
Some alternative lenders now offer more extended repayment periods, making them better suited for certain types of businesses. For example, an auto garage or repair shop would benefit from a longer term so that it doesn’t need to worry about repaying the loan before fixing the vehicle.
If you decide to take out a loan through one of these lenders, make sure you understand the terms and conditions before autographing any agreements. You could end up having to pay more money than you expected.
Getting a bad credit business loan for your small business is easier than ever. There are several ways to get funding for your existing company.
The current economic climate is more restrictive than ever before. As a result, credit scores are now a critical component in assessing the dangers of lending money to businesses. Global events have made some traditional lenders even more cautious when lending to small businesses in the past few years.
As an online lender, Sunwise Capital is aware of the aggravation this situation can cause. We strive to provide financing options for all business owners, including those with poor credit. Thanks to our simple application process, you can get the money you need quickly and easily.
Talk with a Sunwise Capital Funding Specialist or fill out this brief form.
Sunwise Capital provides a wide range of business financing options as an alternative lender, depending on your specific business requirements.
Even if your FICO scores are low, Sunwise Capital’s small business financing offers a simple application process, minimal paperwork, high approval rates, and a quick funding turnaround.
Apply for a business loan with poor credit from Sunwise Capital today.
Because we trust small business owners to know best what they need to do to grow their company, we don’t place any restrictions on how you can use your funds. You can use your working capital to deal with your business’s challenges or expand and grow.
Many small business lenders look at the owner’s personal credit and business credit score. However, not every lender has a high minimum credit score requirement.
One caveat to remember: if you have bad credit, many (but not all) financing options will be more expensive. Your business may be able to qualify for better loans at a lower cost if you have good credit.
If you require funding, you’ll need to know what bad credit business loans are available.
Bad credit is no barrier to getting the money you need to grow your company. When you are trying to get a business loan with bad credit, there are only three steps you need to increase your chances of approval:
Determine which bad credit small business loans have the best chance of approval by researching the requirements for each small business financing option.
What paperwork do I need for a bad credit business loan application?
Business owners with bad credit can get financing from sources other than traditional bank loans. Consider the reputation of the lender and the eligibility requirements and repayment terms when looking into alternative financing options.
The best way to get answers to your questions is to talk to a customer service rep. Check your lender’s dedication to helping you succeed and have a track record of happy clients.
Preparation is critical when applying for a small business loan, especially if your credit is less than stellar. Before submitting your loan application for these types of loans, think about what you can do to increase your chances of getting the loan approval and the best terms possible.
You can do three things to increase your chances of getting a small business loan despite having bad credit.
The value of your unpaid customer invoices may be enough to secure a loan from some lenders. Unpaid invoices are an option as Collateral in invoice financing, and finance companies advance a percentage of each invoice and charge a fee for the service.
If you plan to use the money from the loan to buy new equipment, you may want to investigate equipment loan options. The equipment acts as Collateral or security for the equipment you are financing. The lender can seize your equipment if you default on your loan, but your company shields your personal assets.
Consult a lending expert in the field to determine which financing option is best for you.
When another person agrees to “co-sign” a small business loan agreement, they are essentially taking on some of the responsibility of the loan. Individuals who co-sign on loans are typically financially capable of making the payments if the primary borrower cannot do so.
Be current with your loan payments and reduce or eliminate any late fees. Make sure you make all your payments and pay your bills on time. You don’t need perfect credit or even excellent credit; however, you want to clean up your personal credit history to get the lowest rates and access to capital. Check with the credit bureaus for any errors.
One lender’s definition of poor credit may be another’s gold standard. Keep in mind that each lender sets its standards for acceptable credit.
720-850 (Excellent): A credit score in this range indicates that you are a relatively low-risk borrower. Meeting other criteria, such as length of time in business or revenue, a borrower with personal credit scores in this range may be able to pick and choose the best loan for their business.
670-719 (Good): Credit ratings in this range are excellent. With this kind of score, a borrower can expect to have many lending options; however, not nearly as many options if their scores were higher.
620-669 (Fair): These scores pose a greater risk, especially those at the lower end of this range. A small business loan may be possible, but it’s unlikely to come with the best interest rates. Borrowers with credit scores may have difficulty obtaining a traditional bank loan.
500-619 (Poor): To get a loan, a person with a bad credit score needs to meet other minimum requirements. Annual percentage rates are likely to be high because of a lack of funding options.
Below 500 (Very Poor): A business owner’s chances of getting a business loan with a credit check are slim but not impossible if they have this credit score.
Having a bankruptcy on your credit reports is a red flag, so ask the lender about their policy on defaults. Bankruptcies must be discharged or dismissed in most cases, and some may require that it has been at least 1-2 years since the filing.
A judgment against you or a lien against your property may block you from securing a business loan. It depends on the age of the debt and the date of the judgment. The statute of limitations may also apply.
Banks and credit unions will not consider a loan with liens exceeding $200K, but Sunwise Capital will (if you have a payment plan). You may not need a written payment plan for smaller liens.
Several types of business loans and financing don’t require a high credit score or don’t require a credit check at all. Consider these options if your personal credit rating is low:
When it comes to helping small businesses, microlenders are often non-profit organizations. These short-term loans are from a few hundred dollars to several thousand and are perfect startup business loans.
The Small Business Administration Microloan Program has a $50,000 maximum loan amount, and this financial product is an excellent option for startups.
Unsecured Business Loan Vs. Secured Business Loan
Both unsecured and secured business loans are options for those with credit challenges.
An unsecured business loan is a type of business loan that does not require any collateral as security. This option means that the lender will have no right to seize or take possession of your company’s assets if you fail to repay the borrowed money.
In addition, an unsecured business loan is for short-term financing needs such as working capital and inventory purchases.
The main con of this loan option is that it has higher interest rates than secured loans.
However, there are some advantages associated with these types of loans. For instance, they can finance new equipment purchases like computers, vehicles, machinery, etc.
Another advantage is that unsecured loans do not require borrowers to put up any collateral as a guarantee against defaulting on payments. While there is no potential for loss of an asset, it depends on whether there is a personal guarantee.
On the other hand, secured loans require borrowers to provide Collateral as security for the loan. If you don’t repay the debt, the lender has the right to seize or take ownership of your company’s assets, giving the lender greater protection against defaults.
However, there are benefits to securing a business loan. It can help you obtain more significant funding at lower interest rates. In addition, it can be helpful if you plan to use the funds to buy real estate or equipment.
Short Term Loan
A short term loan is an unsecured business loan with a repayment period of fewer than twelve months. With some lenders, the borrower can choose to repay the loan in full at any time during the loan’s duration, with a discount.
Online lenders usually offer short term loans with higher interest rates than other types of loans.
A short term loan is when you need cash quickly. These loans are ideal for small businesses looking to purchase supplies, pay bills, or cover payroll expenses.
The main drawback of short term loans is that they carry high interest rates. Typically, the interest rate on a short term loan ranges between 10% and 20%, if not more. However, many online lenders will take a risk on a shorter term loan, especially those with poor credit but consistent monthly revenue.
Do You Need a Business Plan?
If you’re looking at online lenders, the answer is “No.”
A business plan is an outline of your company that includes information about its products, services, market, competition, financials, management team, and more. Your plan can be as straightforward or complicated as you want it to be, and the key is that it provides a road map for your business so that you can make decisions based on facts rather than assumptions.
Why Should I Have One?
A well-written business plan helps you avoid making costly mistakes before starting your business. It allows you to delineate your goals and objectives and set realistic expectations for yourself and your employees.
Having a clear vision and mission statement lets you stay focused on your ultimate goal: running a successful business.
Most online or alternative lenders will not require you to provide a business plan.
Low Credit Score Business Loans
Getting business loans from traditional sources is very difficult if you have a bad credit score. But some lenders offer options for people with poor credit scores. Business owners can use these loans to finance virtually any business expense.
The interest rates on these business loans are usually higher than the standard ones. You must meet specific requirements to qualify for a low credit score business loan. For example, you may need proof of steady revenue and good payment history through bank statements.
Business Credit Cards
If you’re looking for a business credit card issued by a typical lender/issuer, they will require a strong credit score.
However, some new entrants into the business credit card space will provide a corporate credit card without looking at your credit score and base the credit limit on your revenue history. One company that will issue a card strictly on the company’s health is Ramp.
Line of Credit
Another business loan option is a line of credit. If you have an acceptable credit score, it allows a borrower to obtain a business line up to a predetermined credit limit.
As you repay it, those funds will become available again. A line of credit is one of the most popular short-term small business financing types.
Many owners use it for working capital and cash flow.
Banks and credit unions typically have strict eligibility requirements for lines of credit. Still, online lenders may be able to provide lines of credit to applicants with scores that are lower if the business meets other criteria.
Business Cash Advances (MCA)
A business cash advance lender or merchant cash advance lender analyzes the company’s past sales (revenue) to determine how much money to lend to a business.
The lender deducts payments from subsequent sales, typically daily or weekly, based on future credit card sales. This loan type uses factor rates.
Credit scores are less critical when applying for this type of financing; however, the sales volume is. You may be subject to a personal credit check, but the minimum credit score requirements are usually low.
This business funding is perfect for prospective borrowers with a limited credit history or bad-credit applicants.
Crowdfunding platforms allow businesses to raise money from people who want to support them. Kickstarter and other reward-based crowdfunding platforms enable companies to reward backers with tangible rewards (often in the form of a product).
Debt-based and equity-based crowdfunding are two types that will enable businesses to raise money by offering equity in exchange for loans.
Credit checks are rarely required, and there are no minimum credit scores to be met. In most cases, the crowdfunding platform will do a credit check, usually for debt-based crowdfunding.
Sometimes, the credit check will rule out open bankruptcy or other serious credit issues. It’s also worth noting that crowdfunding is a great loan option for new businesses.
Believe it or not, you do not need a specific credit score to be eligible for an SBA loan. On the other hand, lenders who offer SBA loans may require a minimum credit score.
These numbers are typically between 640 and 680 or higher. Your chances of getting this type of loan increase if you have a high score.
If a bank or traditional financial institution rejected your loan application for a traditional business loan, you might want to apply with a new lender.
Shop around to find a lender that is more open to working with you, as each lender has its own set of requirements and eligibility criteria.
Other types of business financing, such as invoice factoring, accounts receivable factoring, and merchant cash advances, should also be considered because they are less reliant on credit.
It may be challenging for small business owners with poor credit to secure a small business loan, but options are available.
You can get a small business loan even with a poor credit history. Bad credit business loans are no problem for Sunwise Capital. Even though you’ll have to pay more for the loan, we’ll still lend to your business if you can afford to repay it.
Automatic daily or weekly repayments are available for terms ranging from six to eighteen months on our working capital loans. Factor rates, decimal figures rather than percentages, express interest; our factor rates begin at 1.15 percent.
To calculate the cost of your loan, multiply your factor rate by your loan amount.
Our application process is fast, free, and has a soft credit pull. Checking eligibility will not affect your credit score.
Within 24 hours, we’ll provide you with the best working capital with same-day or next-day funding.
You can apply right now.