Article Summary
Many lenders have their requirements for credit scores, which helps you identify small business loans for bad credit.
Some loans focus less on your business credit history and more on future sales or revenue from invoices.
Providing assets or collateral can make you less risky and enhance your chances of approval by the lender.
The good news: Having a credit score of 500 doesn’t make getting a business loan impossible. But since this score is considered weak, you’ll need to look for bad credit business loans. You should also be prepared for higher borrowing costs, including higher interest rates than those offered to borrowers with strong credit.
To find the best business loan for a credit score of 500, compare several lenders and funding offers, including these seven small loans. Compare the best small business loans for a credit score of 500.
SBA Microloans: Best for Affordable Business Loans
SBA microloans are government-backed small business loans designed to support businesses that are typically shut out of traditional financing. These loans are known for their small sizes, reaching up to $50,000, with interest rates for SBA microloans typically ranging from 8 percent to 13 percent. These features are offered with the hope of providing affordable loan payments for underserved businesses. This type of SBA loan also waives the guarantee fees required by most other SBA loans.
You can find SBA microloans through certified micro lenders, which are usually nonprofit organizations dedicated to seeing small businesses grow and using loans and education to do so. But like most types of SBA loans, the cost of availability is that it can take between 30 to 90 days to complete the funding process.
How to Obtain an SBA Microloan
SBA microloans tend to ease eligibility requirements. Some micro lenders such as Accompany Capital take credit requirements out of the equation. Common requirements for an SBA microloan include:
- Personal credit scores around 500
- A detailed business plan
- Often requires personal guarantees or collateral
Fundible Loans: Best for Low Revenue Requirements
Fundible offers the best mix of online business loans and credit-based crowdfunding. They can handle a variety of small business needs and accept low revenue levels as low as $96,000 annually. The loans offered with this minimum revenue include equipment financing, bridge loans, and invoice financing.
In addition to flexible revenue, a Fundible representative confirmed that the fintech lender works with business owners whose credit scores have dropped to 450. Officially, all three of these loans require a personal credit score of at least 500, according to the website.
Fundible also offers a business line of credit for business owners with personal credit scores of 580 and above. However, this loan requires higher revenues, wanting at least $200,000 annually.
How to Get a Small Business Loan from Fundible
Requirements vary depending on the type of small business loan you choose through Fundible. But the minimum application criteria are:
- A personal credit score of at least 450
- 6 months in business
- $96,000 in annual revenue
Fora Financial Loans: Best for Quick Business Loans
Fora Financial stands out as an online lender that provides high-value business loans within 72 hours or less. Small business owners can choose a short-term working capital loan or proceed with revenue-based financing, which is equivalent to cash flow advances. Both loans offer extensive amounts starting from $5,000 and going up to $1.5 million with repayment terms of up to 16 months.
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Finding online lenders capable of completing approvals faster within 24 hours, while traditional banks may take weeks to approve business loans. Fora Financial rests in the timely space between these funding timelines, making it a great opportunity for obtaining small or large loans with typical flexible lending requirements of online lenders.
How to Get a Small Business Loan from Fora Financial
Fora Financial allows many business owners the opportunity to obtain the financing they need, even with poor credit. Its minimum requirements include:
- $10,000 in average monthly revenue over the past three months
- Personal credit score of 500
- 3 months in business
Bank of America: Best for Credit Lines to Build Credit
Bank of America’s lineup includes a variety of business loans designed for different needs, ranging from term loans to loans for specific purposes. The cash-secured business line of credit is one of the most unique loans.
The business line of credit offers limits starting at $1,000 and allows you to open it with a $1,000 deposit, which acts as available credit to draw from. This enables you to build business credit. Over time, Bank of America may graduate your business to a standard unsecured business line of credit.
How to Get a Small Business Loan from Bank of America
The credit-building line is Bank of America’s most contributory option. Its requirements include:
- $50,000 in annual revenue
- Less than 2 years in business
- $1,000 security deposit
How to Choose a Small Business Loan for a 500 Credit Score
A small business owner with a credit score of 500 will need to find the right lender and do extra work when applying for credit. These steps can increase your chances of approval:
Know Your Credit Score
If you know you have poor credit, it’s best to check your exact credit score to know your standing when applying for business loans. Most lenders set a minimum credit requirement to qualify for a bad credit business loan.
For business credit scores, the lender may look at your personal or business credit history. You can build business credit by working with vendors who offer business credit or by paying expenses using a business credit card.
Choosing the Right Small Business Loan Type for Bad Credit
Getting approved for a business loan may depend on choosing the right type of business loan for bad credit. Any assets or collateral you have may help your case – as lenders see your business as less of a risk since you have more at stake. Types of business loans to consider:
- Short-term loan: A loan with short repayment periods, often for two years or less, with limited loan amounts
- Business line of credit: A reusable credit line that you can draw from at any time after approval
- Small loan: A small loan offered as a traditional loan, alternative loan, or SBA loan; SBA loans allow borrowing up to $50,000
- Invoice financing: Financing approved based on a percentage of outstanding invoices and repaid once the invoices are settled
- Merchant cash advance: Financing approved based on future credit or debit card sales, repaid from a percentage of sales or, less commonly, a fixed payment
Finding the Best Business Loans for Bad Credit
Once you know your financing needs and narrow down funding options, you can look for the best bad credit business loans available. Your goal is to find the offer with the lowest interest rates, fees, and the best features your business qualifies for. Many business lenders may outline their lending requirements directly on their website, or representatives may provide these requirements to you over the phone.
Typically
Lenders typically set requirements for work history, monthly or annual income, and credit score. They may also require a personal guarantee or collateral. When comparing lenders, you may want to get pre-qualified with multiple lenders. This way, you can see the exact loan offers with the rates for bad credit business loans that you will be charged.
Finding a Certified Person
While it is not required, finding a certified person to guarantee payment can help you secure financing, especially if your credit score is too low to qualify for funding on your own. But you want to make sure you are making all payments, or the certified individual will have to make the payments on your behalf or face negative consequences, including negative marks on their credit report.
If the certified person does not fully understand the responsibility, it could ruin the relationship if they are not prepared to support you if your business is unable to make the payments.
Conclusion
Getting a business loan with a personal credit score of 500 may take finding the right loan and submitting your best application. Although options are limited, you can find lenders specializing either in alternative loans or bad credit business loans. Once you know your options, you can compare loans by interest rates and features that best fit your funding purposes.
Frequently Asked Questions
Can I get a business loan with a credit score of 500?
Yes. Some lenders welcome business owners with credit scores of 500. These loans focus less on your credit score and more on the strength of your business and your ability to repay the loan. Most bad credit business loans may have high interest rates and fees. However, the Small Business Administration has loan programs and lenders that can assist borrowers with low credit scores. These loans typically have favorable interest rates.
What is the minimum credit score for an SBA loan?
The minimum credit score for an SBA loan depends on the lender. Banks and credit unions typically require a credit score of 650 or higher. Some online lenders like Lendio offer SBA loans for credit scores of 600. Some micro lenders may have no credit score requirements.
Can I get a $10,000 loan with a credit score of 500?
It is possible to get a $10,000 loan with a credit score of 500. It depends on other factors such as the type of business loan, how long you have been in business, and whether you have collateral to support the loan. If you are having difficulty obtaining a loan from traditional sources, you may qualify for a micro SBA loan.
Can I get a startup loan with bad credit?
Yes, startup loans tend to be lenient concerning credit requirements. For example, a lender might offer business loans with a minimum personal credit score of 600 while accepting businesses that have been operating for six months. Some lenders actually grant business loans for startups with a credit score of 500.
How can I finance my business without credit?
It is possible to obtain a business loan without a credit check, although it’s challenging, as most lenders set a minimum credit score requirement for eligibility. You may be limited in startup funding options such as business grants or financing through crowdfunding or funding from a pool of investors.
What types of business loans do not require a credit check?
If you do not have a credit history showing that you qualify for traditional business loans, you may choose a specific type of bad credit small business loan. This could include invoice financing, invoice settlement, or merchant cash advances. Invoice financing uses outstanding invoices and your clients’ credit to determine loan approval, while merchant cash advances are based on future credit and debit card sales and are repaid from a percentage of sales or, less commonly, as a fixed payment.
Source:
https://www.aol.com/best-business-loans-500-credit-134107676.html
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