If your FICO credit score is between 300 and 629, then you might think that you can’t get a loan for your small business. While it’s true that most traditional banks don’t lend to customers with a credit score in that range, there are some alternative lenders that will work with customers with a less than stellar personal credit score. These alternative lenders tend to focus on your business and its strength instead of the business owner’s financial situation and credit history.
Before you start looking for a lender, know that you’ll likely have a high APR because of your lower credit score, and you may also have additional fees in addition to your principal and interest payments.
You might consider trying to improve your personal credit score before applying for a loan. This will lower your interest rate and give you more options in which to choose from for lenders.
For New Businesses Under One-Year-Old
It is hard to get approved for a loan if you have been in business less than one year. Even those with good credit scores have a hard time getting a loan for a new business.
Personal Credit Scores Above 500
If your personal credit score is at least 500, then you have a few options in obtaining a business loan. Both Fundbox and Kabbage will work with you to provide capital for your business so you can expand or take care of your expenses.
Fundbox can provide a line of credit up to $100,000 for working capital for your business. They do require that your business have an annual revenue of at least $25,000. There is no personal credit score requirement, but they do not lend to citizens of Georgia, Connecticut, or New York.
Pros – Easy to qualify for a business loan,
Can pay off the loan early
Cons – APR can be between 15 percent and 59 percent,
Not available in all areas
Another lender that doesn’t require a minimum credit score in order to secure a loan is Kabbage. They provide loans up to $150,000. Your business should have at least $50,000 in revenue each year. You must also have a business checking account or use an online payment system.
Pros – Get money quickly,
Fewer qualifications than other lenders
Cons – High APRs between 24 percent and 99 percent,
Prepayment doesn’t offer much benefit
Personal Credit Scores Above 600
With a credit score of 600 or more, you have two more options, BlueVine and StreetShares.
BlueVine offers loans up to $150,000. They also consider loans for businesses with at least $120,000 in revenue each year that have six months of history. They also offer invoice factoring, making them a good choice for a short-term loan. Most of their loans are paid back in less than a year.
Pros – Must be in business six months,
Get funds in at little as 24 hours
Cons – APR can be anywhere from 16 percent to 62 percent,
Loans must be repaid within a year
StreetShares has a lower APR but a longer loan term. They offer loans up to three years.
Pros – Loans to businesses with revenue as low as $25,000,
No penalty for prepayment
Cons – Must make weekly payments,
The maximum that you can borrow is 20 percent of your yearly revenue
If you have several customers that have not paid their invoices, you can turn that into cash with Bluevine or Fundbox. The lender will look at your customers and how strong their companies are and whether they can pay their invoices on time. They factor this into the loan decision more than they do your personal credit score.
If you have invoices up to $2.5 million, BlueVine is a good choice. They charge between 0.5 percent and 1 percent of the amount of the invoice, but the fee drops to 0.1 to 0.2 percent if your clients pay in a timely manner.
Pros – No minimum credit score needed,
No minimum revenue needed,
No fees if you repay before a set amount of time
Cons – The maximum that you can borrow is $100,000,
High APRs between 16.4 and 76.5 percent
Fundbox offers invoice financing for amounts less than $100,000. You pay an average fee of 7 percent for each invoice that need advanced, and you have 12 weeks to repay. You can also choose a 24 week repayment plan with a 15.7 percent fee.
Pros – Get funds quickly,
Can borrow up to $2.5 million
Cons – High APRs between 17 percent and 60 percent,
More difficult to get approved than Fundbox
Getting a Small Business Grant
If you don’t want to get a loan or can’t get a loan for your business, consider getting a small business grant. The federal government offers many grants that are available for several different business types. The applications for grants can be difficult, but the reward is money to help your business grow that doesn’t need to be paid back.
Look for government grants at grants.gov. You can look for grants opportunities that match your business needs, including grants just for small businesses.
BusinessUSA is an easier way to search for grants. There is a questionnaire to fill out to find opportunities that are a match for your needs. Note that this site also lists loans, so be sure you know if you are applying for a loan or grant.
State and Local Grants
You may have more success with a local or state grant because there is less competition. Look for grant opportunities at your local Small Business Development Center.
Sometimes these grants have specific requirements that have to be met, so be sure to read the requirements before you apply.
Some large corporations offer grants to small businesses, especially to a nonprofit that serves their community. These grants are often available for a limited time, so be sure to note the deadlines for submissions..
If your small business needs capital, then there are options. Even if your personal credit isn’t stellar, you can still get a business loan or grant.