Funding a startup can be challenging. Most lenders would like to go through your financial statements, business tax returns, annual turnover, collateral, and other types of financial aspects that you are still expected to build up at par. The overall challenge becomes even more significant for startups having bad credit. Thankfully, there is the presence of alternative lenders who specialize in funding startups having bad credit -irrespective of how long you have been in the business.
When your startup has bad credit, you can still get access to small business loan. It is because your overall credit score will not matter significantly as much as the entire financial health of your business. Most lenders require possessing a minimum credit score of around 500 while the business should be at least 6 months in operation and have an annual revenue of around $30,000.
Some of the loan products for small businesses include:
- Working capital
- Line of credit
- Invoice factoring
- Merchant cash advance
- Equipment financing
- Business expansion
- SBA or Small Business Administration loans
You can expect paying higher interest rates and fees when you have bad credit as a business owner. When you leverage specific loan products, like merchant cash advance or invoice factoring, these small business loans tend to depend on money that has already been invoiced or future sales, but not yet received.
The Best Small Business Loans for Startups having Bad Credit
What is regarded as the bad credit? Credit scores that are below the score of 670 are regarded as subprime credit. When your business has a subprime credit score, it implies that borrowers are facing difficulties in repaying the loan. Subprime credit scores also have two categories -bad and fair credit.
Credit scores under the value of 580 are regarded as very poor or bad. Scored that typically range between 580 and 669 are regarded as fair. Still, they tend to be subprime scores. While credit scores for small businesses can go as low as 300, still bad credit small business loans usually do not accept applicants having a score of under 500.
For your ease, we have prepared a list of the best small business loans for those are only starting out and have a bad credit score.
OnDeck is the best small business loan provider as it accepts a minimum credit score of 625. At the same time, it also offers access to same-day funding. When you have been involved in the business for over a year while having a dedicated business account and around $100,000 in terms of annual revenue, you can consider applying for a small business loan.
Introduced in 2006, OnDeck is a publicly-traded small business loan provider that works both on phone and online. It is regarded as the best provider of small business loans as for qualifying for a loan, you are only expected to feature a credit score of 625 -significantly less than what other providers offer. Moreover, after receiving approval for the loan, you can think of receiving funds within the same day. Moreover, you can also look forward to receiving money once you have paid the half of the loan amount.
With OnDeck, it is possible to borrow around an amount between $5000 and $250,000. At the same time, you can accept lines of credit ranging between $6,000 and $100,000. The availability of amount to be borrowed will depend on the overall business revenue. The repayment terms for small business loans with OnDeck is around 24 months. For the line of credit loan, the repayment tenure is for 12 months. The minimum APR for both line of credit and business loans is 29.9 percent.
PayPal LoanBuilder is selected as the lender offering access to the best type of short-loan business loans. It is because it offers access to loans with terms between 13 weeks and 52 weeks. The minimum credit score towards receiving the small business loan is 580. To top it all, funding for your small business loan can take place during the next business day itself.
PayPal serves to be an online payment platform that is now offering access to short-term small business loans through LoanBuilder. The loan is referred to as PayPal Business Loan. The lending process is made possible through WebBank -a renowned member of the FDIC. PayPal is regarded as one of the best providers of short-term loans for small businesses having bad credit. It is because the loan terms are for a maximum period of 52 weeks. To qualify for the loan, you only require a minimum credit score of 580.
The loan application via PayPal can be done through the online portal or even on the phone within a period of 10 minutes. The approval process of the loan tends to be instant. Upon approval, small business owners can look forward to receiving a funding of around $5,000 to around $150,000. The amount is transferred directly onto the bank account -almost the next business day. Both the personal guarantee and blanket lien are required while applying for the loan. Automatic repayments on a weekly basis will come out directly out of the business account.
While it is not possible to adjust the payment’s frequency, you can specify any particular day of the week during which the payments will come out. In case of the failure of a payment, there is a NSF or Non-sufficient Fund fee of $20.
If you require flexible financing for your small business, you can think of applying for a line of credit loan for your small business with Lendio. You are not expected to utilize all of the funds. Moreover, you will not be paying for the funds you will not use. Most people consider a line of credit like a safety net.
Lendio is regarded as the lending marketplace for small businesses that was introduced in 2011 and tends to match with businesses with more than 75 lenders to secure the required financing. As Lendio is not responsible for generating the loan, you will receive access to several offers while selecting the one that best suits your specific needs. It is regarded as the best line of credit loan option for small businesses having bad credit. It is because you are required to possess a credit score of only 560. Moreover, there is no obligation to leverage the entire funds. At the same time, you will be paying nothing on the unused funds.
Applications for line of credit loans will take around 15 minutes to get completed. Therefore, these are great options for businesses who are at least 6 months old and have around $50,000 in terms of annual revenues. Business owners are expected to have a minimum credit score of around 560. Moreover, they should wait for around 2 weeks to receive the desired funding. Terms of loans are provided for a period of 1-2 years.
With a line of credit loan option, you are expected to borrow against the same as often as possible. The only clause is that you are not expected to exceed the credit limit. Borrowers can borrow between the amount of $1,000 and $500,000. There is the presence of interest rates of 8 percent to 24 percent. Based on the lender you choose, you might be asked for the personal guarantee.
With Rapid Finance, it is possible to borrow a massive amount of up to $1 million. It will ultimately depend on your monthly revenues. The loan terms can be up to 60 months. The lender will go through the overall health of your small business -not just the business credit score or personal score.
Rapid Finance serves to be a sister organization of Quicken Loans while offering dedicated lending solutions to both small and medium-scale businesses. The website of the loan provider boasts the presence of excellent reviews while offering one of the longest terms for small business loans -up to 60 months. These are some of the reasons why Rapid Finance is regarded as the best option for small business loans -especially for long-term financing and those having bad credit. Moreover, as you apply for the small business loan, you can mostly get loan approval as well as funding within a span of few hours.
As you wish to qualify for the small business loan, your business is expected to be at least 3-6 months old. However, in case of other loan types, like most of the short-term loans, you will require the presence of your business for at least two years. There is a requirement of the blanket lien. Rapid Finance is known to advertise monthly, weekly, and even daily payments.
Small business loans can help you in expanding the overall operations, paying for supplies, covering payroll, and managing the overall cash flow. When you have bad credit, it can be difficult to find a lender. Still, you have access to multiple small business loan options with bad credit. Choose the best one.