Bad Credit? Where to Find Business Loans

Bad credit is a red flag for lenders.

A weak personal credit score is an indication you’ve mismanaged your personal finances in the past. Bad credit (a score that ranges between 300 and 629) is one reason business loan applications get rejected — and the approval rate of business loans from big banks was just 22.8% as of October 2015, according to a Biz2Credit report. So it’s tough to get a traditional business loan, and even tougher if your credit is bad.

But it is still possible to get a business loan with bad credit. Below we have highlighted some of your best options depending on your business’s needs.

If you have bad credit but need money fast: OnDeck

OnDeck is an alternative lender offering both a term loan and a line of credit. The term loan is an option for businesses that need quick cash to expand, whether it’s to purchase equipment or make renovations, while the line of credit is best for managing cash flow and working capital.

To be eligible for the term loan, you need a minimum personal credit score of 500 with no bankruptcies in the last two years. You also need to have been in business at least one year and have a minimum $100,000 in annual revenue.

Once you complete an application on OnDeck’s website, you’ll get a decision within minutes and funding as soon as the next day. And here’s a credit-building bonus: OnDeck reports your payment activity to the three credit bureaus, so paying the loan on time can help you build your credit score.

Loan amount: $5,000 to $500,000 APR: 8.9% to 98.4% Loan term: repaid daily or weekly for 3 to 36 months Approval time: decisions within minutes; funding in as little as 24 hours Note: OnDeck also offers lines of credits of up to $100,000 Read our OnDeck review

Get Started Apply on OnDeck’s secure site

If you have bad credit but need working capital: Kabbage

Kabbage is a good option for business owners who need money fast for short-term working capital (such as meeting payroll and buying inventory), as the company provides a line of credit that you can borrow from and repay on an as-needed basis.

Although Kabbage does check your credit history, the company does not use your personal credit score as the primary criterion in its underwriting. It takes into account other data such as accounting, banking and e-commerce records.

You need to have minimum annual revenue of $60,000, have been in business at least one year, and have a business checking or PayPal account.

The company’s online application typically can be completed in a few minutes, and if the loan is approved, you may be funded just as quickly, or within a few days. However, you’ll pay for this speed and convenience, as the cost of Kabbage lines of credit ranges from 20% to 113% APR.

Loan amount: $2,000 to $100,000 APR: 20% to 113% Loan term: 6 months Approval time: a few minutes to several days Read our Kabbage review

Get Started Apply on Kabbage’s secure site

If you have bad credit but need to buy inventory: Dealstruck

Dealstruck is a good option for businesses that need to buy inventory, as the company’s inventory line of credit lets you finance 100% of your inventory purchases up to $500,000.

Dealstruck has a “soft” FICO score minimum of 600 but has accepted scores in the 500 range, says Ethan Senturia, the company’s co-founder and chief executive officer. To qualify, you’ll also need to have been in business at least one year, have at least $12,500 in monthly revenue and be profitable.

Loan amount: Up to $500,000 APR: 11% to 22% + prime rate Loan term: 6 months per draw Approval time: Pre-qualification in minutes, offer letter in 2 to 3 days, average of 10 days to funding Read our Dealstruck review

Get Started Apply on Dealstruck’s secure site

If you have bad credit but have unpaid invoices: BlueVine and Fundbox

If you have bad credit and lack collateral but you have unpaid invoices, BlueVine and Fundbox offer options for invoice financing. These lenders provide an advance based on the value of your invoices, and approval is based on the strength of your cash flow and the financial strength of your debtors — not your personal credit score.

To qualify for Fundbox, you’ll need to use online accounting or bookkeeping software such as QuickBooks, Xero or Wave and have a minimum of six months’ activity in one of these software applications. With BlueVine, you’ll need a minimum personal credit score of 530 and revenue of at least $70,000 a year. Both lenders also require that you’ve had no personal bankruptcies in the last year.

Check out our side-by-side comparison of BlueVine vs. Fundbox to see which is the better fit.

Loan amount: $5,000 to $150,000 APR: 23% to 61% Loan term: 40 to 90 days Approval time: 1 hour to 1 day Read our BlueVine review

Get Started Apply on BlueVine’s secure site

Loan amount: $500 to $20,000 APR: 44% to 66% Loan term: equal repayments over 12 weeks Approval time: Instant approval with funding in 1 to 3 business days Read our Fundbox review

Get Started Apply on Fundbox’s secure site

If you have bad credit but your business is solid: SmartBiz

SmartBiz is the best option if you have a healthy business. The company originates SBA loans with lower rates than other online lenders, and it originates SBA loans faster than traditional banks.

The lender accepts borrowers with a minimum credit score of 600, but even though your credit score may be weak, SmartBiz is looking for overall strong borrowers who meet the SBA’s underwriting requirements.

You must be current on any government-related loan and have been in business at least two years. And although there’s no minimum annual revenue requirement, most borrowers report between $50,000 and $5 million.

You also must have had no bankruptcies or foreclosures in the last three years and no outstanding tax liens or recent charge-offs or settlements.

If you can qualify, you can borrow up to $350,000, with loans repaid over a period of 10 years, resulting in smaller monthly payments than your other loan options.

Finally, the company requires a lien on business assets for all of its loans, which includes assets such as accounts receivable, inventory, real estate and equipment.

Loan amount: $30,000 to $350,000 APR: 7% to 8% Loan term: 10 years Approval time: Within 7 days after submitting application Read our SmartBiz review

Get Started Apply on SmartBiz’s secure site

Bottom line on bad-credit small-business loans

Bad personal credit is often an obstacle in getting business loans from a traditional bank. Alternative lenders offer alternatives, as they place more emphasis on the strength and operating history of your business and less on your credit. As with any small-business loan, it’s important to carefully compare all of your options, weighing each loan’s terms and APR.

Find and compare the best small-business loans

If none of these works for you, or if you’d like to compare your loan options, NerdWallet has curated a list of small-business loans best for business owners. All of our recommendations are based on the lender’s market scope and track record and on business owners’ needs, as well as rates and other factors so you can make the right financing decision.

Compare business loans

Steve Nicastro is a staff writer at NerdWallet, a personal finance website. Email: Steven.N@nerdwallet.com. Twitter: @StevenNicastro.

This post was updated. It was originally published on Aug. 20, 2015.

from NerdWallet Credit Card Blog
http://www.nerdwallet.com/blog/small-business/small-business-loans-bad-credit/