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Can I Get a Business Loan With Bad Credit?

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April 25, 2022

Most business owners know how important adequate funding is for running a business. Thankfully, if you need cash to fund your business, you have several options. You may think applying for a business loan through a traditional lender is the best choice, but what if you have less-than-stellar credit?

Getting a business loan with bad credit

It can be challenging to operate a business when you have poor credit. Many traditional banks and lenders require a minimum credit score to approve a business loan or business line of credit, leaving fewer options for those with a shaky credit history. That being said, Good Funding was created to offer an alternative solution for small businesses, startups, or any business owner who may not meet the stringent requirements set by traditional lenders. We are here to tell you it is possible to get business funding with bad credit.

See how much you qualify for!

Credit Scores & Why They Matter

Even though Good Funding evaluates many factors besides credit score, it is important to know how your personal and business credit history can impact your ability to obtain financing. Most business funders place heavy consideration on credit score when evaluating a funding application. Even though Good Funding evaluates many factors besides credit score, it is important to know how your credit history can impact your ability to obtain financing. At the very least, you should know your personal credit score is determined by the five C's of credit: character, capacity, capital, conditions, and collateral.

The Five C's of Credit:

  1. Character: Your credit history and how you've previously managed debt.
  2. Capacity: Your ability to repay loans. Capacity is based on comparing the amount of debt you have to your income.
  3. Capital: Any amount you are willing to put towards your loan. This could include savings, investments, and assets.
  4. Conditions: Other information a lender could use to determine if you qualify for a loan. For example, sharing your business plan with the lender could be helpful if you are applying for a business loan.
  5. Collateral: An asset a lender can take as security for a loan.

All of the factors above combined determine your creditworthiness. Credit scores can range between 300 and 850. The higher your credit score, the better your chance of getting approved for a traditional business loan.

What is considered a good credit score?

Lenders will set their own standards for what they will accept, but here is a general outline of what is regarded as a good or bad credit score:

  • Excellent Credit: 720 or higher
  • Good Credit: 690 to 719
  • Fair Credit: 630 to 689
  • Bad Credit: 629 or below

What credit score do you need for a business line of credit?

Each business funding company has its own credit threshold for approving a line of credit. Some lenders offer loans to borrowers with a credit score of 560, and some only lend to borrowers with a 660 credit score or higher. As an alternative business funding company, Good Funding evaluates many factors beyond your credit score. Plus, we make the process quick and seamless from application to funding. There is no hard credit pull, and you can apply today and receive funding as soon as tomorrow.

Apply today and receive funds tomorrow

Credit Scores and Interest Rates

Most banks or lenders use your credit score as a benchmark to predict how at-risk you are of default. As a result, businesses with good to excellent credit are often offered better interest rates. Those with a lower credit rating may still get approved, but the business funder will charge a higher rate to anticipate covering a potential loss.

Good Funding recognizes other equally effective benchmarks when evaluating a business owner's ability to pay back funding, such as recent revenue, time in business, industry and location. Our underwriting allows more businesses the opportunity to access much-needed working capital.

Relationship between personal credit and business loan approval

Whether or not your business has an established credit history, lenders will typically use your personal credit score to determine if you are a good candidate for their business funding product. As a result, improving your personal financial situation and credit score is also advisable before you apply for business funding.

How to choose the right bad credit business loan?

  1. Research - It is essential to understand what financing options are available to your business. Keep in mind, a poor credit history could cause difficulty getting approved for certain business funding, such as an SBA loan. However, before you get discouraged, remember there is a whole alternative business funding industry ready to support you. Good Funding wants to help small business owners and startups get the funding they need to move their businesses forward.
  2. Determine how much funding you need - Perhaps you are looking to invest in a new piece of equipment or just looking to maintain cash flow during the off season; either way, understanding how much you are looking to borrow is critical as you evaluate business funding options. If you are unsure what makes the most sense for your business, one of our funding specialists can help you determine the best option to fund your business.
  3. Get your funds - Once you have weighed all factors, the next step is to begin applying for your business funding. During the application process, be mindful that some lenders do a hard credit pull, and too many credit pulls can negatively impact your credit score. In addition, some lenders take days or weeks to approve an application and deposit funds.

If you apply with Good Funding, we will never do a hard credit pull. We will take a wholistic look at your business - no matter your credit score - and if we approve you, funds could be in your account by the next business day and you can get back to running your business sooner.

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Ready to move your business foward?

Start your application today, and you could get funding in as little as one business day!
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