How to get a business loan with bad credit?

March 2022

Do you have a hard time finding a business loan for your business because you have a bad credit score? We can't turn back time, but we can guide you to find suitable business loans and financing programs for bad credit. Also, if you still have doubts about your credit score, we want to help you understand it and take charge of your finances! Let's begin by defining the basics.

What is a FICO credit score?

FICO credit score tells funder and lenders your ability to repay a debt or loan and consists of a 3-digit number, and its parameters range from 300 to 850. The higher the number, the better the credibility of your credit score. Look at it as a thermometer that measures the quality of your credit history.

Now, regarding what affects your credit score, a common question is what factors cause your FICO credit to go down or up?

Among the factors, we have your credit history in the United States, pending debts, if you have available credit at the moment, and finally, if you have been late in making any payment.

The average credit score is around 706, which is good. But if you score below 670, you will have difficulties accessing a bank loan or credit for your business. In addition, the interest rates they offer you will likely be higher, and you will need to provide some collateral.

A "bad credit" score is quite common, especially if you start your own business from scratch and your credit is affected. But you should know that the past does not define the present or future. Now let's analyze more of the factors you should consider if you want to improve your credit score.

Five factors that affect your credit score

Understanding it is the best way to master and improve your credit score. Below we explain five factors that could affect your credit history with their respective percentage of importance based on the FICO model:

  1. Your payment history (35%): If you've paid back or still haven't paid back loans or credit card payments.

  2. The amounts you owe (30%): If you owe large sums on anything from your house mortgage to credit card balance or other debts. 

  3. The length of your credit history (15%): If you haven't been paying back debt or credit or still don't have a credit history. 

  4. The amount of different types of credits you own (10%): The more types of credit or loans you have, the more your credit score improves. 

  5. New and recent credit you've applied for (10%): You might also have a bad credit score if you've been denied loans or credit cards or multiple maxed-out credit cards.

What do funders consider bad credit?

The most common models to detect if your credit score is wrong or not are the FICO or VantageScore system. Both models use statistical analysis of data stored in consumer credit files. These data can predict the probability that a consumer will default on a loan. Financiers or funders use it to investigate you and understand if you are one of those who pay your bills on time; 90% of the significant funders use FICO scores to make funding decisions.

The FICO credit score ranges between 300 and 850 points, and the guidelines to determine how good it is are as follows:

  • 300-629: Bad or insufficient credit score.

  • 630-689: Fair credit. 

  • 690-719: Great credit. 

  • 720 or higher: Excellent credit. 

Now, your credit score according to the VantageScore model is as follows:

  • 300-661: Bad or insufficient credit.

  • 601-690: "Fair" credit.

  • 691 or more: Excellent.

You can get one free annual copy of your credit report from Equifax, Experian, and Transunion

Can you get a loan with no credit check?

You can do this by applying for alternative business funding or by looking into fast working capital loans for small businesses. Providers often work fast and online with in-house algorithms that can easily connect your business with a suitable funder in minutes.

Also, they typically don't consider your credit score the only measure of your financial worth. At One Park Financial, we work with a network of alternative funding sources and will help guide you through the application process.The following are some of the benefits you can get with One Park Financial:

  • We look at your business's health and invest in your vision's future.

  • You run no risk. We give you a seven-day right of rescission at no cost if you decide to cancel.

  • We do not ask for guarantees.

  • Payment flexibility. We are not a traditional loan. You will be able to adjust the payments if the monthly performance of your business changes.

  • Discounts for early payment: We will not charge you extra if you want to pay early.

Let's get to work. The only requirements to see if you pre-qualify is to have been in business for at least three months and produce $7,500 in gross monthly income. Complete a pre qualification form and contact one of our financing experts. We care about your growth vision. We like to think that we are more partners in the success of your business.

Disclaimer: This material has been prepared for informational purposes only. It is not intended to provide and should not be relied on for tax, legal, or accounting advice. We suggest consulting with your tax, legal, and accounting advisor before engaging in any transaction.