2 Small Business Loans That Don’t Require FICO Credit Checks

You don’t have great credit but need a loan for your business? You don’t have to worry about your credit score, as there are still financing options available that do not require you to pass a FICO credit test.

Instead of being judged based on your credit score you can apply for a loan based upon outstanding invoices and how much you make each day. These loan options can be approved even if your company is less than one year old.

These loans can be used to grow your small business and increase your credit score over time.

Here are the facts…

Why would a person want to borrow money without having to check their credit?

You might be interested in a loan for your business that does not require you to have a FICO credit score.

Your FICO credit score will not be good enough for a bank to lend you a loan. A bank will generally require that you have a credit score of 800 or higher.

A score of 700 is considered to be a good score and will increase your chances of getting a large loan. You won’t find a lender at the big banks if your score is below 640 points. This category includes 34% of Americans with high credit scores.

You might be able to avoid credit checks even if your score is above 640. You should consider that hard credit checks can affect your score.

You can get funding in either case without having to pass a credit check. However, there may be restrictions. In this case, the loan amount will be lower and approval will be based largely on your business performance.

No FICO loan option #1: Accounts receivable funding

It can be frustrating to find yourself in a cash crunch, even though you owe money. This happens often in winter when many people are staying put and clients are slow in establishing their annual budgets.

Invoice financing is also known as accounts receivable financing or invoice financing. It’s a loan that is based on the outstanding invoices. You can get a variety of cash depending on how much money is owed to you through outstanding invoices.

An accounts receivable loan works in a simple way. You receive money against your invoices. After you have received the money, you will pay back the loan plus any interest.

Your invoicing documentation will be used to calculate the loan. A FICO credit check is not required.

“What if February’s slump in sales takes you by surprise?”

Although obtaining financing, such as a loan for a business, can take weeks to complete, you will need the money now. The best solution is invoice financing.

A receivable loan differs from invoice factoring which is another popular financing option for small businesses. Factoring is where a company purchases a portion of your invoices to collect from late-paying customers. This fee is charged by the company.

A factoring company typically will only offer funding for a small fraction of your total invoice value. You can get up to 100% of the invoice value with accounts receivable financing

You are still responsible for collecting your invoices, unlike factoring. Customers won’t even know you borrowed money. This prevents customers from being confused about why another company contacts them, or if your business isn’t in good health.

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Requirements to Financing Accounts Receivables:

1. You Must Have Outstanding Invoices

To receive accounts receivable financing, you will need to have outstanding invoices. This documentation is essential as the entire system depends on how much money you owe. You will need to look for another way of financing if you want to get funding quickly but do not have any outstanding invoices.

2. Minimum 6 Months in Business

Lenders will still require some business history, even though there is no FICO credit check for these loans. This is necessary to show that you have customers who are legitimate and are able to collect your invoices.

3. Accounting Software Is a Must

These services are often online so you will need accounting software to securely share your data with them. These companies will need to see your financial health and that accounting software is needed. Xero, FreshBooks and Intuit QuickBooks are just a few options.

4. A Bankruptcy is not Permitted

A FICO credit check is not required. However, companies won’t approve you for accounts receivable funding if your bankruptcy record is present.

5. Minimum $4,000 Monthly Revenue is Required

You must also prove that your business is making revenue. The lender will be able to determine if you are able to repay the loan with interest, even though the standard is very low.

No FICO loan option #2: ACH Cash Flow Loan

Many businesses that are consumer-facing, such as restaurants and retail stores, do not use invoices. These types of businesses are paid with debit cards or credit cards. To provide fast capital for restaurants or stores, lenders have developed a program based on future sales.

ACH cash flow loans are now available to nearly all small businesses.

ACH cash flow loan lenders will look at your average daily balance in your business checking account rather than credit card receipts for many businesses. Merchant cash advances are a different type of loan that is more similar to ACH cash flow loans. Credit card receipts can be used for a type called a merchant cash loan.

Automated Clearing House (ACH) is the acronym for Automated Clearing House. This system allows lenders to make small repayments from your bank account at fixed intervals. These intervals are often daily or weekly and are set up in advance.

This type of loan has repayments similar to the way you would automate utility payments.

These lenders do not require a good credit rating. Instead, they base their decisions on your agreement that you will repay the loan on an ongoing, repeated basis.

This recurrent access to your account reduces the risk for the lender. The repayment period can be extended if business slows down — though there may be fees. You can repay the loan quicker if your business grows.

Although the interest rate on ACH cash flow loans is typically higher than traditional bank loans it’s a quick way to raise capital to pay for repairs or other urgent needs.

If you have a low FICO score and a steady flow of money into your business account, these loans may be a good option.

Requirements to apply for ACH Cash Flow loans:

1. Minimum 3 Months in Business

This type of loan is dependent on your ability make small, frequent payments. It’s therefore shorter than accounts receivable financing. You must still prove that your business exists.

2. Some Industries May Be Excluded

ACH cash flow loan lenders won’t approve applications from the following industries: legal services, adult entertainment, auto dealers and parts sales, mining, oil, gas extraction, firearms sales, gasoline stations, transportation and warehousing as well as travel agencies and wholesale trade. Contact the lender if your business is not listed in these categories to determine if they are eligible.

3. Minimum Monthly Sales are $12,000

ACH cash flow loans have a higher minimum monthly sales requirement because a portion will be taken out each day to repay the loan. Lenders must be satisfied that the loan can be repaid and the business is still viable.

4. A Minimum of 51% Ownership Must Be Yours

The applicant for the loan must be majority owner of the small-business.

5. A Minimum of 6 Time per Month is Required

If a business makes $10,000 per month in bank deposits, or $7,000 per monthly in credit card transactions, they may be eligible for ACH cash flow loan. You must have at least 6 bank deposits per calendar month for the past three months if you plan to apply based upon bank deposits.

6. No Open Bankruptcies

You must have no open bankruptcies, just like with accounts receivable financing.

What can you expect

1. Lenders Need a Social Security Number

Lenders will typically need your Social Security Number in order to determine if you are bankrupt or have active liens. They will not look at your FICO credit score.

2. There will likely be a soft pull on your credit

Soft inquiries will often be made on your credit report when you apply for these loans. Soft pulls are not as damaging to your credit score as a hard inquiry. You are the one asking for a hard inquiry. This is usually for an application for a loan or employment. Soft inquiries, on the contrary, are requested by someone or an organization other than yourself.

3. Time your Expectations

You are applying for a loan without having to pass a FICO credit check. This is the standard way that lenders determine your trustworthiness. These loans are not as flexible or offer the same interest rates and scale of options as a bank loan. These loans are typically smaller than standard bank loans, usually around $10,000. They also have a higher interest rates. A loan that exceeds your monthly income is unlikely to be approved. These financing options typically have a payback period of 3-6 months.

Build your credit

You can build credit by responsibly taking out these loans. Because the repayment terms are so short, paying off these loans on time can help you build your credit score. Because these loans do not require a hard pull, there is no credit risk to your credit score. Your ability to repay the loans on-time is what will determine any credit benefit.

You can contact Progressive Business Capital online, or by calling at 800 508-4532 if you’re interested in these types of loans.

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