Benefits and Drawbacks of Business Loans That Don’t Require a Credit Check
When it comes to obtaining business financing, your credit score plays a key role in your ability to qualify for loans. While traditional lenders typically check your personal and business credit, many online lenders offer loan products that don’t require a credit check at all. While there are benefits to loan options that don’t require a credit check, it’s important to understand the drawbacks of these types of loans.
What Are the Benefits of a Business Loan That Doesn’t Require a Credit Check?
Not all lenders require a credit check, and those that do typically only make a soft inquiry into your credit as opposed to a hard inquiry. This means that you won’t see a negative impact on your credit score, which can be helpful if you have poor or limited credit. Additionally, loans that don’t perform a credit check are often approved more quickly than those that do. In some cases, you can receive funding within a day or two. This type of financing can be especially helpful if you need access to capital quickly.
However, it’s important to note that loan terms may be short and that these loans are typically more expensive than other types of business financing. This is because lenders that don’t rely as much on credit tend to charge higher interest rates and fees. Additionally, many of these loans don’t report on-time payments to the credit bureaus, which can make it difficult for you to build your business’ credit profile and qualify for other business financing options in the future.
If you’re considering applying for a business loan that doesn’t require a credit check, it’s also worth researching alternative options for funding. For example, some small businesses are able to secure funds from friends and family members. While this can be a risky option for your company, it can also be an effective way to secure the funds you need without needing to undergo a credit check.
It’s also important to remember that even though some lenders don’t check your credit, there are others that do. In some cases, these lenders will still look at other financial documents to determine if you’ll be able to repay the debt. Additionally, it’s important to review each lender’s terms and conditions thoroughly before you agree to anything. This will ensure that you’re getting the best possible deal and aren’t paying more than you need to. If you have questions about the best way to secure the capital you need, contact a reputable lending partner. They can help you find the right solution for your business’ unique circumstances. Randa Kriss is a senior staff writer at Fundera, a website that reviews small business products, software, and services. She has written hundreds of reviews across a wide swath of business topics, including ecommerce, accounting, credit cards, bank accounts, loans, payroll, and human resources solutions. She has a bachelor’s degree in economics and finance from the University of Colorado at Denver. business loans no credit check