If you have bad credit, you might be wondering if you can get a business loan without a credit check. Some lenders claim to offer “no credit check” loans, but are they really an option? Let’s take a closer look.
What is a credit check?
A credit check is when a lender reviews your credit history—whether personal or business—to evaluate your ability to repay a loan. This involves looking at factors such as your payment history, outstanding debts, and overall credit score. Lenders use this information to determine if you qualify for a loan and to set the terms, including the interest rate.
There are two types of credit checks:
- Soft credit check - Doesn’t affect your credit score and is usually done for pre-approvals.
- Hard credit check - Can impact your credit score and is used when applying for a loan or credit.
Why lenders credit check
Lenders perform credit checks to protect both themselves and borrowers. By reviewing a borrower’s credit history, lenders can assess their ability to repay the loan and determine the level of risk involved. This helps prevent businesses from taking on more debt than they can manage, reducing the likelihood of falling into unmanageable financial situations. Ultimately, credit checks ensure that both parties are making informed, responsible lending decisions.
Can you get a business loan without a credit check?
The short answer is no, you can’t get a business loan without some form of credit check. Traditional banks and lenders typically require either a soft or hard credit check when you apply. This is a crucial step in their approval process, helping them assess risk and ensure responsible lending.
However, some alternative lenders may only conduct a 'soft' credit check instead of a 'hard' search, and they often place greater emphasis on other factors like business revenue, cash flow, or assets, rather than relying solely on credit scores. Let’s take a closer look at some of these alternative options below.
Types of no credit check business loans:
- Invoice Financing - Technically not a business loan and not considered debt. This option allows businesses to unlock cash tied up in unpaid B2B invoices, providing quick access to funds without taking on traditional debt. It helps maintain cash flow while waiting for customers to pay.
- Merchant Cash Advances - Again, this is not a business loan in the traditional sense. Instead, businesses receive a lump sum in exchange for a percentage of future card sales, with repayments automatically deducted from daily transactions. This provides quick access to funds without the fixed repayment structure of a traditional loan.
It is important to note that some lenders may still require a 'hard' credit check in certain cases. Always check the lender’s requirements before applying to avoid unexpected hard credit checks.
Is a no credit check business loan right for me?
Seeking a no credit check business loan may seem appealing, especially for businesses with poor credit, but they simply don’t exist. All UK lenders require some form of credit check - whether soft or hard - as part of their lending process.
While alternative options like invoice financing or merchant cash advances are available and may only require a soft credit check, they aren’t suitable for all businesses. Invoice financing is ideal for B2B sales, while merchant cash advances require consistent card transactions to work effectively.
In conclusion, a business loan without a hard credit check might be a good fit in some cases, but it's essential to carefully assess your business needs, the loan terms, and how they will impact your finances.
Compare business loans without a credit check
At BLFBC, we help you compare business loans without impacting your credit score. We offer a variety of alternative funding solutions from UK lenders, focusing on factors like business revenue or future sales. Start comparing now.
This article is for general informational purposes only and does not constitute financial or professional advice. Always seek professional guidance before making any decisions.
