Presented by QuickBooks Capital
This article is presented in partnership with QuickBooks Capital, helping small businesses access flexible financing when it’s needed most.
Running a business means staying ready for anything—whether it’s a sudden expense, a slow sales month, or a new growth opportunity you didn’t see coming. That’s where a business line of credit comes in.
A line of credit (LOC) is a flexible funding solution that gives you access to a set amount of capital, which you can draw from as needed. Unlike a traditional loan, you don’t receive a lump sum up front. Instead, you borrow only what you need, when you need it—and repay only what you use.
This makes a line of credit ideal for:
- Bridging cash flow gaps
- Covering unexpected costs
- Investing in short-term growth initiatives
Whether you’re stocking up on seasonal inventory, managing a delay in customer payments, or launching a new marketing campaign, a line of credit gives you the flexibility to act without disrupting your cash flow.
Through QuickBooks Capital, eligible Intuit QuickBooks Online users can apply for a line of credit directly within their account—making it easier to manage both your books and your borrowing in one place.1
Why a Business Line of Credit Works for Small Businesses
Choosing the right type of funding is critical, especially when you need flexibility. Here’s why a business line of credit is one of the most useful financial tools for small business owners.
1. Use it when you need it, repay it when you don’t.
Unlike a term loan, a line of credit gives you access to funds on demand. You can typically draw exactly what you need, when you need it, and repay early without penalties. It’s working capital, on your terms.
2. Only pay for what you use.
You’re only charged interest on the portion you borrow—not your total approved limit. That makes a line of credit more cost-effective than taking out a lump sum loan when you’re unsure how much funding you’ll actually need.
3. Bridge short-term cash flow gaps.
Use a line of credit to smooth over delayed customer payments, cover unexpected repairs, or handle months with three payrolls. It’s ideal for the “in-between” expenses that don’t warrant a full loan, but can’t go on a credit card.
4. Fuel business growth without delay.
Whether you’re launching a new marketing campaign, hiring seasonal help, or taking on a big new client, a line of credit gives you the power to act fast without draining your reserves.
5. Separate your business and personal finances.
Keeping business expenses separate is key for accurate bookkeeping and financial planning. A dedicated business line of credit helps you draw clear lines, while building credit in your business’s name.
6. Build business credit over time.
Making on-time payments and using your credit line responsibly can help improve your business credit profile—potentially unlocking better terms and higher limits in the future.
Did you know? QuickBooks Capital offers access to lines of credit using your QuickBooks account information. This solution is faster and easier to apply for than traditional financing options, factoring in your business performance—with no impact on your personal credit score when you apply.
Your line of credit isn’t just for emergencies, it’s a tool
Here are six strategic ways small business owners can use their credit lines to move faster, think bigger, and grow on their own terms.
Collaborate or co-market with another business
Forming a temporary alliance, like co-hosting an event or running a joint campaign, is a smart way to reach new customers and share costs.
Use your line of credit to cover upfront expenses like design work, contract fees, or shared marketing, without dipping into your cash reserves.
Bring in expert help when it counts
Want to shake up your sales strategy, refine your pricing, or improve operations before peak season? A consultant or coach can bring fresh thinking, but often require upfront fees.
Your line of credit lets you invest in expertise when the time is right, and repay gradually.
Go after government contracts
Landing a government contract can be a game-changer, but the bidding process often requires new tools, team members, and compliance investments—long before you get paid.
A line of credit bridges that cash flow gap and positions your business to compete confidently.
Launch or scale a marketing campaign
Digital advertising, content creation, and campaign testing can be expensive—but often essential. A line of credit allows you to fund your campaign in stages, matching spend to ROI.
With a line of credit, you can launch now, then replenish as results roll in.
Expand through franchising
Franchising is a smart way to grow with lower overhead—but getting started takes time and capital. Legal, training, and marketing costs can add up quickly.
Your line of credit helps you build the foundation, without locking into a fixed loan you may not need all at once.
Fulfill a major contract without draining cash flow
Winning a big job or client is exciting, but delivering can be expensive. A line of credit gives you working capital to hire help, purchase supplies, or ramp up production—then pay it back as revenue comes in.
What to look for in a business line of credit
A business line of credit can be one of your most powerful financial tools—but only if it works the way your business does. Here are four things to look for when evaluating your options.
Business-based underwriting
Many lenders rely on your personal credit score. Look for a provider that evaluates your business’s actual performance, like revenue trends, transaction history and cash flow.
Speed and simplicity
The application process shouldn’t take days. A modern line of credit should offer a quick, online application, fast approval decisions, and access to funds in a day or two—if not faster.
Flexibility without surprises
Look for a lender that offers clear terms, no hidden fees, and the freedom to draw only what you need. Bonus points if you can repay early without penalty!
Integration with your financial tools
Your line of credit should work with—not against—your financial systems. When your funding lives in the same ecosystem as your bookkeeping, forecasting, and reporting, everything gets easier.
Running a restaurant is a labor of love, but it’s also one of the most capital-intensive businesses there is.
From equipment and inventory, to leasing a storefront or expanding into a second location, having access to reliable funding can make or break your growth.
The Small Business Administration provides restaurant owners with affordable ways to secure the capital they need to launch, expand, or stabilize their operations.
In this guide, we’ll walk you through SBA loan options for restaurants, so you can find the ideal funding option to start, expand, or sustain your business.
SBA loans for restaurants
Two SBA loan programs stand out for restaurant owners:
SBA 7(a) loans because they offer flexible funding that can be used for working capital, equipment, inventory, renovations—or even buying an existing restaurant.
- Loan amount: Up to $5 million
- Terms: Up to 10 years for working capital and equipment; up to 25 years for real estate
- Interest: Variable or fixed, typically prime + 2–3%
SBA 504 loans because they’re built for big-ticket purchases like commercial real estate or large equipment upgrades, while offering long repayment terms and fixed rates.
- Loan amount: Up to $5.5 million (often more for energy-efficient projects)
- Terms: 10, 20, or 25 years
- Structure: 50% bank loan, 40% SBA-backed loan, 10% borrower contribution
- Interest: Fixed, often below market rates
Each program comes with its own advantages. The key is knowing which loan type fits your exact goals, and what you need to do to put them to work.
Pros and cons of SBA loans for restaurant owners
Why restaurant owners like SBA loans
1. Access to working capital:
Whether you're covering payroll, stocking up on inventory, or managing a seasonal lull, 7(a) loans offer flexible funding that you can put to work fast—with as much going towards working capital as you need.
2. Favorable interest rates and terms:
Because SBA loans are partially guaranteed by the government, lenders can offer lower rates and longer repayment terms than many traditional loans.
3. Support for real estate and equipment purchases:
Need to buy a building or invest in a new kitchen line? The SBA 504 loan is designed specifically for major fixed assets.
What to watch for
1. Slower approval processes:
Compared to online lenders or revenue-based financing, SBA loans can take longer to process—typically 30 to 90 days, depending on your documentation.
2. Heavy documentation:
You’ll need to provide business financials, a plan for the funds, and personal financials. It’ll never be one-click lending.
3. May require collateral or personal guarantees:
Especially for larger loans, lenders may want additional security. It’s something you should be prepared for. Sometimes that requires you to put up personal collateral along with your business.
Which SBA loan makes sense for your restaurant?
Not every restaurant needs a million-dollar renovation. Some just need new fryers. Others are scaling across state lines.
Whatever the case may be, the right SBA loan depends on your stage, your strategy, and how fast you need to move.
Consider the guidance below.
Working capital
Best fit: SBA 7(a)
If you need breathing room between payroll and vendor invoices, SBA 7(a) loans will be your best bet.
The SBA 7(a) loan is a fit here because it allows for unrestricted working capital use (within the flexible terms mentioned above of up to $5 million in funding and repayment terms up to 10 years).
It gives you time to stabilize cash flow without choking your margins.
Real estate purchase, Improvement, or Build
Best fit: SBA 504
If you're planning to buy your building, renovate a commercial space, or build a new location, the SBA 504 loan is what you’ll need.
The 504 loan offers long-term, fixed-rate financing (up to $5.5 million, with repayment terms of 10, 20, or 25 years).
It typically requires just 10% down from the borrower, which makes it easier to preserve working capital while investing in property you’ll own and control.
To get a 504 loan, you’ll need to occupy at least 51% of the property.
Equipment purchase
Best fit: SBA 7(a) or 504
From commercial ovens and refrigeration systems to POS terminals and kitchen hoods, restaurant equipment doesn’t come cheap.
Depending on where you fall on the matrix of time urgency to size of need, you can turn to either 7(a) loans or 504 loans.
If your needs are under $500K or tied to other expenses like working capital, the SBA 7(a) loan provides faster, more flexible funding.
For large-scale or long-life equipment, the SBA 504 offers better fixed rates and extended repayment terms—letting you finance major upgrades without depleting your short-term cash flow.
Inventory purchase
Best fit: SBA 7(a)
You never want to be strapped down at the liberty of your capital when prepping for holidays or seasonal peaks.
The SBA 7(a) loan is the best fit here because it allows for working capital use—including inventory—under the favorable terms we mentioned earlier (up to $5 million in funding and 10-year repayment timelines).
It’s a flexible, low-cost way to keep your shelves stocked and your kitchen moving no matter what.
Furniture or fixture upgrades
Best fit: SBA 7(a)
Need to upgrade your dining room, invest in new booths, or improve your outdoor seating? These improvements often don’t qualify as fixed assets.
The SBA 7(a) loan covers furniture, fixtures, and other soft costs that traditional loans (and 504 loans) may not, and with more favorable terms than other loans that do.
It gives you up to 10 years to repay and the freedom to bundle these upgrades with other expenses like marketing, hiring, or signage.
Expansion (adding a new location)
Best fit: SBA 7(a) or 504
Opening a second (third, fourth, etc.) location is a major milestone, but also a major expense.
The SBA 7(a) loan is ideal if you’re leasing a new space and need flexible capital for improvements, equipment, staffing, marketing, and other launch costs.
If you're buying property as part of the expansion, SBA 504 loans offer longer terms, lower down payments, and fixed-rate financing that protects your cash flow as you grow. As previously mentioned, 504 loans can be used specifically for purchasing real estate.
Buying a restaurant
Best fit: SBA 7(a)
Acquiring an existing restaurant can be a faster route to profitability, but it requires upfront capital and a lender that understands your business model well.
SBA 7(a) loans support full business acquisitions, including goodwill, equipment, and real estate (if applicable).
It’s one of the few programs designed specifically to help entrepreneurs buy an existing business without needing a massive injection of equity.
Using SBA loans to grow your restaurant
The restaurant industry isn’t easy—but the right financing can make life a lot easier for you, and a lot more pleasant for your diners.
SBA loans offer a rare combination of affordability, flexibility, and support. Whether you’re opening your doors or leveling up existing operations, knowing your options is the first step.
Need help finding the right SBA lender—or figuring out what you qualify for? Lendio can help. One application, multiple offers, no guesswork.
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The U.S. Small Business Administration (SBA) opens the door to a wide range of opportunities for women looking to launch, grow, or strengthen their businesses.
Whether you're seeking startup capital, expansion funding, or access to government contracts, the SBA offers programs, partnerships, and loan options designed to help women move forward with confidence.
From funding programs like SBA 7(a) and microloans to specialized initiatives that support women-owned businesses in federal contracting, the SBA can serve as a powerful springboard for female entrepreneurs ready to start and scale their businesses.
Women-owned businesses are one of the fastest-growing and most dynamic forces in the U.S. economy. Here, we’ll take a look at how you can get access to capital, as well as how you can connect to a larger ecosystem of support, education, and long-term growth.
Types of SBA Loans for Women Entrepreneurs
Women business owners have access to the full suite of SBA loan programs.
These loans are designed to support small businesses at various stages—whether you're starting out, expanding operations, or investing in long-term assets.
SBA 7(a) Loan Program
The SBA 7(a) loan is the most popular and versatile SBA program. It's commonly used for working capital, equipment purchases, inventory, hiring, refinancing existing debt, or even buying a business.
- Loan amounts: Up to $5 million
- Repayment terms: Up to 10 years for working capital, up to 25 years for real estate
- Interest rates: Competitive, partially backed by the SBA
- Best for: Established businesses looking for flexibility in how they use funds
SBA Microloan Program
Microloans are smaller loans often distributed by nonprofit community lenders, many of which focus specifically on underserved or underrepresented groups—including women.
- Loan amounts: Up to $50,000
- Average loan size: ~$13,000
- Best for: Startups, early-stage businesses, or entrepreneurs with limited credit history
- Additional perks: Lenders often provide business training or mentorship alongside financing
SBA 504 Loan Program
The 504 loan is ideal for businesses making large investments in fixed assets—like buying commercial property, renovating a facility, or purchasing major equipment.
- Loan amounts: Up to $5.5 million
- Terms: 10, 20, or 25 years
- Best for: Businesses planning long-term investments in infrastructure or expansion
To recap, here’s a comparison chart of each SBA loan feature. For more information on each loan feature, visit the guides linked below!
Unique Loan and Grant Opportunities for Female Entrepreneurs
In addition to SBA loans, women entrepreneurs can benefit from alternative funding sources that cater specifically to women-owned or minority-owned businesses, including SBA grants.
CDFIs and Nonprofit Microlenders
Community Development Financial Institutions (CDFIs) are local lenders that prioritize underserved entrepreneurs.
Many provide microloans, business coaching, and flexible underwriting that makes funding more accessible for women-owned businesses.
Examples include:
- Accion Opportunity Fund – A national lender supporting women, minority, and low-to-moderate-income entrepreneurs with loans and mentoring.
- Grameen America – Offers group-based microloans to women in low-income communities across major U.S. cities.
- LiftFund – Based in Texas and serving the Southeast, LiftFund provides microloans and SBA options for women and minority founders.
- Women’s Economic Ventures (WEV) – A California-based nonprofit offering up to $50,000 in small business loans and robust business training programs.
Women’s Business Centers (WBCs)
WBCs are SBA-funded resource hubs that provide free or low-cost business advising, training, and access to capital—all tailored to the needs of women entrepreneurs.
Notable centers include:
- Renaissance Entrepreneurship Center (CA) – Serving the Bay Area with workshops, mentorship, and financing support.
- Women’s Business Development Center (IL) – One of the largest WBCs, based in Chicago, offering certification help, loan readiness, and bilingual programming.
- The Catalyst Center (AL) – Supporting women- and minority-owned businesses in the Southeast through education, coaching, and capital access.
You can find your nearest Women’s Business Center using the SBA’s WBC locator tool.
Grants and Private Programs
Although harder to get, grants offer another option—especially for women-led ventures focused on innovation or impact.
Grants don’t require repayment, but they’re often very competitive and come with specific eligibility requirements.
Well-known grant programs for women entrepreneurs include:
- Amber Grant: Offers $10,000 monthly grants to women-owned businesses across industries.
- Tory Burch Foundation Fellows Program: Provides a $5,000 grant and fellowship for early-stage, mission-driven women entrepreneurs.
- Cartier Women’s Initiative: Awards up to $100,000 to women-led, socially impactful businesses worldwide.
Many states and cities offer local or regional grants for women-owned businesses through economic development programs.
Your local Women’s Business Center (WBC) or Small Business Development Center (SBDC) can help you identify grant opportunities in your area.
SBA Programs & Certifications for Women-Owned Businesses
These programs don't provide direct loans—but they significantly expand the opportunities and advantages available to women-owned businesses through training, certification, and access to government contracts.
WOSB Federal Contracting Program
The Women-Owned Small Business (WOSB) Federal Contracting Program helps women gain access to government contracts in industries where women have been historically underrepresented.
- What it does: Sets aside specific federal contracts for certified WOSBs
- Eligibility: At least 51% women-owned and controlled; U.S. citizens
- Certification: Apply via wosb.certify.sba.gov
This program opens the door to millions in federal spending across sectors like construction, cybersecurity, staffing, and professional services.
8(a) Business Development Program
Designed for socially and economically disadvantaged entrepreneurs, the 8(a) program offers support through mentorship, government contracting assistance, and access to business development resources.
- Length: 9-year program
- Benefits: Sole-source government contracts, networking, and training
- Eligibility: Business must be at least 51% owned by an individual who is both socially and economically disadvantaged. Many women qualify.
SBA’s Ascent Learning Platform
Ascent is a free, SBA-backed digital learning platform built specifically for women entrepreneurs. It includes in-depth modules on:
- Financial strategy
- Scaling operations
- Marketing and branding
- Goal setting
Ideal for business owners who want self-paced training or additional prep before applying for funding.
National Women’s Business Council (NWBC)
The NWBC is an independent federal advisory council that conducts research and advocates for policy that supports women in business.
While it doesn't offer funding directly, it's a valuable resource for understanding national trends and tapping into the broader network of women-led enterprises.
Navigating SBA Resources as a Woman Entrepreneur
Getting funding is about making strategic use of the resources available to you. So, as you move forward:
- Use support programs strategically – for example, combine a microloan with free advising from a WBC or pair a 7(a) loan with WOSB certification.
- Know your numbers – have a business plan, revenue projections, and clear credit profile before you apply.
- Leverage local resources – WBCs, SCORE mentors, and SBA district offices can help you prep for applications and certifications.
- Apply through multiple channels – Lendio allows you to compare SBA loan offers from multiple lenders with one application.
With the right strategy and support, the funding you need to grow your business is well within reach.
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Your small business has limited or no financial history, and you find yourself needing a business loan. With no tax returns on-hand and limited paperwork, what are your options?
As you might imagine, this is a very common question for entrepreneurs and new small business owners. The good news is that there are options.
Here, we’ll walk you through no-doc business loans, as well as some other alternative options that don’t require tax returns, and what you do need to qualify for them.
First off, can I get a business loan without tax returns?
Yes, you can. Many lenders offer business loans without requiring tax returns, typically referred to as no-doc business loans or low-doc business loans (meaning no or low documentation).
Traditional banks often require extensive documentation and financial history. Online and alternative lenders are making it easier to secure funding with minimal paperwork.
If you’re looking for a no-doc business loan, you’re probably in one of the following categories:
- Startup without tax history
- Small business owner with no/fluctuating income
- Entrepreneur prioritizing fast access to funds (regardless of tax history)
What are no-doc business loans?
A no-doc business loan is a type of financing that doesn’t require traditional financial statements like tax returns, profit and loss statements, or detailed revenue reports.
Instead, lenders evaluate eligibility with more day-to-day items, like bank statements, credit scores, merchant transactions, and invoices (both incoming and outgoing).
How do no-doc loans work?
Unlike traditional business loans, no-doc loans prioritize speed and accessibility. They’re typically offered by online or alternative lenders, and less so from traditional banks.
Instead of tax returns, lenders assess:
- Business bank statements (typically 3–12 months)
- Personal or business credit score
- Merchant processing statements (for businesses with credit card sales)
- Outstanding invoices (for invoice financing options)
As is the case for any alternative or fast loan options, no-doc business loans typically come with higher interest rates, lower funding amounts, and less favorable repayment terms.
Personal and business credit scores, the steadiness of your business (revenue and spending), and collateral will typically be the biggest determinants of the terms you qualify for.
No-doc business loan options
As discussed above, no-doc loan options don’t require the same level of paperwork as traditional loans.
Most no-doc lenders still require business bank statements, credit scores, outstanding invoices, and proof of ownership (business info like EIN, entity type) and a voided check.
No-doc loans do not require:
- Tax returns
- (Some) Financial statements
- Business plans
- Personal collateral
1. Revenue-based financing
Outside of specific no-doc loans, you still have a selection of options that won’t require a tax return. A business cash advance, for example, is an advance based on the future sales of your business, while a merchant cash advance is an advance on the future credit card sales of your business.
How does it work?
A lender provides a lump sum upfront. For business cash advances, daily or weekly repayments are determined based on your cash flow. With MCAs, repayment is based on a percentage of your daily credit card transactions. Because repayment is based on sales, it’s a good option for business with strong, steady revenue.
Want to learn more? Read about your options for revenue-based financing.
When you shouldn’t use revenue-based financing:
- If you have tight profit margins. Repayments come daily/weekly, which can drain cash fast.
- If you’re not as familiar with factor rates - these rates are expressed differently than typical interest rates and require some additional calculation to understand the total cost of your loan.
- If you’re looking for long-term growth capital. Revenue-based financing is for short-term growth, not strategic scaling.
2. Business lines of credit
A business line of credit works like a personal credit card, allowing small businesses to draw funds as needed up to a set limit. Unlike traditional loans, a line of credit is not delivered as a lump sum, but can be accessed as needed at any time (so long as the amount stays within the credit limit).
A business line of credit serves as a great safety net for different types of small businesses.
When you shouldn’t use a business line of credit:
- If your startup is brand new. Lenders typically want 6–12+ months in business.
- If you need a lump sum of cash upfront.
- If you need money yesterday. LOC approvals can take a few days.
3. Invoice financing & factoring
Invoice factoring allows businesses to get an advance on unpaid invoices.
Lenders front a percentage of the invoice amount, giving small businesses access to immediate capital, instead of having to wait for customers to pay in-full. Repayment happens when the customer pays their invoice.
When you shouldn’t use invoice factoring:
- If you don’t have invoices to factor (i.e. consumer retail, restaurants, etc.)
- If you have low-margin invoices. Factoring fees can eat into profits.
- If you don’t want clients to know you’re factoring (some lenders notify your customers during the process).
4. Short-term business loans
Short-term small business loans give you access to a lump sum upfront, with fixed repayment over a short period (usually 3 to 24 months, though sometimes up to 36).
Payments are daily, weekly, or monthly, depending on your terms. Like no-doc business loans, short-term loans require little documentation, but come with higher interest rates compared to traditional loans.
When you shouldn’t look for a short-term business loan:
- If you have tight cash flow. Daily or weekly repayments can get rough fast
- If you’re looking for long-term, low-cost funding. You’ll get a better deal with SBA or term loans.
- If you don’t have revenue. You likely won’t qualify.
Feature comparison of small business loans that don't require tax returns
Qualifying for a no-doc business loan
Even without tax returns, lenders still need to evaluate the financial health of your business. So, even if you’re looking for a no-doc or low-doc business loan option, you should still be prepared with:
- A Strong Credit Score: No-doc lenders often rely heavily on personal or business credit scores.
- Bank Statements: Demonstrating steady cash flow helps prove repayment ability.
- Proof of Revenue: Alternative documentation, like merchant account statements or invoices, can replace tax returns.
- Collateral (Optional): Some lenders offer secured no-doc loans if you can provide business assets as collateral, which will help you qualify for more favorable terms.
Explore your options
Not having tax returns shouldn’t stop you from securing the funding your business needs. By exploring alternative financing options like no-doc loans, BCAs, and short-term loans, you can find something that works for you, and works for you now.
If you’re ready to explore your options, Lendio can connect you with lenders offering business loans without tax returns. Get started today!
Starting a small business is expensive. Almost every small business owner faces startup expenses, whether you’re a solopreneur needing a laptop or a construction company purchasing a lot full of heavy machinery. Inventory and equipment must be bought, employees or contractors must be paid, and rent comes due every month.
What’s harder, outside funding is often difficult to access when your company is young, but in need of capital. Startup business loans are a great way to bridge this funding gap—and even if you have a suboptimal credit score, there are forms of financing you can probably still access.
Best startup business loans for bad credit with easy approval.
The following list highlights lenders from our selection of best business loans that offer minimum credit requirements of 650 or below and a minimum time in business requirement of six months or less.
Additional lenders to consider
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Small business loan options for startups with bad credit.
If you’re starting a business with a lower credit score, there are several loan routes you can take.
Service providers
As embedded financing unlocks new ways for business service providers and platforms to service their customers, financing options are now available in places you already frequent. From accounting software to e-commerce platforms, many tools you already use to run your business may offer access to capital directly within their interface—often with faster approvals and tailored options based on your business data.
SBA loans
While the SBA 7(a) and SBA 504 loan programs were created for established businesses, the SBA does offer two startup loans.
1. Microloans
The Small Business Administration's (SBA) microloan program is designed specifically to assist small businesses, start-ups, and nonprofit child care centers. This program offers loans up to $50,000, with the average loan being around $13,000. The funds can be used for various purposes including working capital, inventory, supplies, and machinery or equipment. However, microloans cannot be used to pay off existing debts or purchase real estate.
To qualify for an SBA Microloan, the borrower must meet certain criteria:
- Credit history - The borrower's credit history is reviewed. While there isn't a minimum credit score requirement, a good credit history can improve the chances of approval.
- Collateral - Depending on the loan amount, the borrower may have to provide collateral to secure the loan.
Remember, the SBA doesn’t provide the loan itself, but instead, it works with approved intermediary lenders to offer these loans.
2. Community Advantage 7(a) Loans
The Community Advantage (CA) program (now under the SBA 7(a) program) is another offering by the SBA, aimed at promoting economic growth in underserved markets. Community Advantage Small Business Lending Companies (SBLCs) can provide up to $350,000 in funding. These funds can be used for a range of business activities, including startup costs, expansion of an existing business, and working capital.
To qualify for a Community Advantage loan, certain criteria must be met:
- Credit history - Similar to the SBA Microloan, the borrower's credit history is assessed. While no specific minimum credit score is set, borrowers with a good credit history typically have a higher chance of approval.
- Collateral - Depending on the loan amount, collateral might be required to secure the loan. The specifics regarding collateral are determined on a case-by-case basis.
- Location - The business must be located in an approved underserved market. These included businesses located in Low-to-Moderate Income communities, Empowerment Zones and Enterprise Communities, Historically Underutilized Business Zones, Promise Zones, Opportunity Zones, and rural areas. Additionally, each lender is authorized to work within a certain state or group of states.
- Demographics: Underserved markets also include newer businesses in operation for less than two years, businesses that are at least 51% owned by veterans, or businesses with at least 50% low-income workers.
Remember, as with the SBA Microloan program, the SBA does not provide the loan directly. Instead, it works with approved SBLCs to provide Community Advantage loans.
Online lenders
In the realm of bad credit business loans, online lenders often emerge as a viable option for startups. These lenders provide a variety of financing options, many of which are designed with lenient credit requirements, specifically catering to business owners with bad credit. While online lenders also offer SBA loans and term loans with more stringent credit requirements, they also offer alternative forms of financing.
Business Lines of Credit
Many online lenders provide business lines of credit that allow businesses to draw funds up to a maximum limit as needed. Similar to a credit card, you only pay interest on the amount you use, making it a flexible financing option.
Invoice Financing
Online lenders often offer invoice financing, allowing businesses to borrow against their outstanding invoices. This can provide immediate cash flow while waiting for customers to pay.
Revenue-based financing
A revenue-based financing, sometimes called a business or merchant cash advance, is an upfront sum of cash in exchange for a slice of future sales. This can be a beneficial option for businesses with strong sales but poor credit.
Equipment Financing
Equipment financing is offered in the form of a term loan or equipment lease for the purchase of qualified equipment. Since the equipment serves as partial collateral for the loan, equipment funders often have less stringent credit score requirements.
CDFIs
Community Development Financial Institutions, or CDFIs, are private financial entities that are primarily dedicated to delivering responsible, affordable lending to aid low-income, low-wealth, and other disadvantaged communities. CDFIs play a significant role in generating economic growth and opportunity in some of the nation's most distressed communities. They can offer an array of financial products and services, including business loans, to help underserved communities join the economic mainstream.
CDFIs are found across the United States, and you can locate one near you by visiting the CDFI Fund's Award Database. This database provides information about CDFIs that have received financial awards or recognition from the U.S. Department of the Treasury.
In terms of requirements to work with CDFIs to get a business loan, it varies across different institutions. However, typical requirements may include a business plan, financial projections, personal and business credit history, and collateral. Some CDFIs may also require that the business operates in a specific geographic area or serves a particular community. It's recommended to directly contact a CDFI for their specific lending criteria and application process.
How to get a startup business loan with bad credit.
Navigating the world of business financing with poor credit can seem daunting, but it's far from impossible. Let's dive into the steps to get your startup funded, even if your credit score isn't quite up to par.
- Evaluate your needs - The first step to obtaining a startup business loan is to evaluate your business needs. Understand how much money you need and what you will use it for. This clarity will help you determine the type of loan appropriate for your business.
- Research your options - Research various loan options available for startups. Each type of loan has its own eligibility criteria and terms, including minimum credit score requirements. Compare those requirements to your current credit score to see if you may qualify.
- Prepare your business plan - Lenders generally require a comprehensive business plan. This should include an overview of your business, details about your products or services, market analysis, organizational structure, and financial projections.
- Gather required documentation - Gather all required documents such as financial statements, tax returns, and legal documents. The specific documents required will vary by lender, so make sure to check with them directly.
- Apply for the loan - Once you have all the necessary documents and a complete business plan, apply for the loan. This process varies depending on the lender. It could be online or in-person.
Alternate forms of financing
In addition to a small business loan, there are alternate forms of financing that can be explored if you have a lower credit score.
Crowdfunding
Crowdfunding platforms like Kickstarter or Indiegogo allow you to raise capital through small contributions from a large number of people. This form of financing is often used by startups looking to launch new products or services, and it also offers an opportunity to validate your business idea in the market.
Venture capital
Venture capitalists invest in startups with high growth potential in exchange for equity in the company. These investments are high-risk but can provide substantial funds for your business, with the bonus of gaining experienced partners who can offer strategic advice.
Grants
Business grants are sums of money awarded by government departments, foundations, trusts, and corporations to help businesses get started or grow. The great advantage of a grant is that it doesn't need to be repaid. On the downside, competition can be intense, and the application process can be time-consuming.
Business credit cards
You will need a credit score of at least 650 to qualify for a business credit card, but if you meet that minimum requirement, a business credit card is a great way to bolster your credit even further while covering smaller, short-term expenses.
Personal loan
In some circumstances, you may qualify for a personal loan with a poor credit score. While this may not be the most ideal option, it could provide you with the funds you need to get your business off the ground. Just make sure to carefully consider the terms and interest rates before making a decision.
Business loan credit score requirements vary based on many factors. Different lenders (even non-traditional lenders) might look at the same business loan requirements and weigh their importance differently.
It’s also true that your relationship to your lender may open more opportunities for you, even with a credit score that’s less than perfect. If you have a long relationship with your bank or credit union, or use a platform or service that provides financing to customers, these relationships can open the door to business loans not available to the general public.
Before you go into the bank, you’ll want to know where you stand with these four very important metrics:
- Your credit score—both your personal and business score (yes, there is more than one)
- Years in business—most banks want to see two or more
- Your annual revenues—more is better than less
- Your collateral—there are different types of collateral, depending upon the type of loan you’re looking for
Credit score is number one for a myriad of reasons. It’s the most important metric and is the cause of most rejections. Although there is hope for business owners with less-than-stellar credit, those options come with a cost. Minimum credit score requirements vary by loan type and lender, but you'll have the most options available to you with a minimum credit score of 650.
Minimum credit score by loan type.
Here are the minimum personal credit score requirements for each type of business financing to get an idea of the options available to you.
Minimum credit score by lender type.
Here are the minimum personal credit score requirements for each type of business financing to get an idea of the options available to you.
Why does credit score matter?
Credit scores play an influential role in securing a business loan. This three-digit number quantifies your fiscal responsibility and reliability, providing lenders with a quick, objective assessment of your credit risk.
In essence, a good credit score signals to lenders that you've consistently fulfilled your financial obligations to other lenders on time and are likely to repay their loans promptly. Consequently, businesses with higher credit scores are often offered more favorable loan terms, including lower interest rates and longer repayment periods.
Conversely, a bad credit score could denote a higher risk proposition for the lender, potentially leading to a rejected application or a higher interest rate and stringent loan conditions.
About personal credit scores.
One of the most commonly used personal credit scores is the FICO Score, developed by the Fair Isaac Corporation. The FICO Score is calculated based on five main components, each weighted differently:
- Payment history (35%) - This represents whether you've paid past credit accounts on time.
- Amounts owed (30%) - This includes the total amount of credit and loans you're utilizing compared to your total credit limit, also known as your credit utilization ratio.
- Length of credit history (15%) - This considers the age of your oldest credit account, the age of your newest credit account, and an average of all your accounts.
- New credit (10%) - This comprises the number of new accounts you've opened or applied for recently, including credit inquiries.
- Credit mix (10%) - This takes into account the diversity of your credit portfolio, including credit cards, retail accounts, installment loans, mortgage loans, and others.
FICO credit scores range from 300 to 850. Here's a general classification of FICO scores:
Bad credit: 300-579
Within a credit score of 300-579, you'll struggle to qualify for business financing. Once your score gets above 500, you may qualify for a revenue-based financing, equipment financing, or invoice factoring depending on the lender and whether you meet other requirements.
Fair credit: 580-669
With a fair credit score of 580-669, you'll meet most minimum credit score requirements for revenue-based financing, invoice factoring, or equipment financing. If your score is 600 or above, you're more likely to qualify for a line of credit or term loan.
Good credit: 670-739
Within this credit range, you'll likely meet all lender's minimum credit requirements for term, SBA, commercial real estate, and bank loans.
Very good credit: 740-799
Exceptional credit: 800-850
About business credit scores.
A business credit score, much like a personal credit score, is a numerical representation of a business' creditworthiness. It provides a quick, objective snapshot of the financial health of a business and its ability to repay debts on time. The score is generated by credit bureaus such as Dun & Bradstreet, Equifax, and Experian, and ranges typically from 0 to 100.
The calculation of a business credit score considers several factors, including:
- Payment history - As with personal credit, timely repayment of debts is crucial. Regular, on-time payments to creditors enhance your business credit score.
- Credit utilization ratio - This measures how much of your available credit your business is currently using. A lower ratio (meaning you're using less of your available credit) can positively impact your score.
- Length of credit history - Longer credit histories can benefit your business credit score, as they provide more data about your business' long-term financial behavior.
- Public records - Bankruptcies, liens, and judgments can negatively affect your business credit score.
- Company size and industry risk - Larger companies and those in industries considered less risky may have higher credit scores.
Lenders will typically review both your personal credit score and business credit score when qualifying you for a business loan.
How to increase your credit score.
If your credit score isn’t where you’d like it to be, there are several steps you can take to boost your score.
Monitor your credit reports.
Equifax, Experian, and TransUnion are where you’ll want to go to see your current credit reports. Make sure the information is correct and that your credit report reflects reality. Make sure that the report is accurate and that accounts that aren’t yours aren’t reported. Bankruptcies that are over 10 years old or the associated accounts shouldn’t be reflected on the report. Other negative information older than seven years should also not be included in the report.
Get a major credit card.
Getting a credit card and using it wisely is one way to boost your credit. Be sure to make your payments on time.
Arrange automatic payments on every card or loan.
It’s easy to forget to make a payment when it’s due or let travel or a busy schedule distract you. However, credit scores are very sensitive to whether or not you make payments on time, so do all you can to keep your payments regular and on time.
Don’t let disputes go to collections.
If you have a dispute with a vendor and you allow it to escalate to collections, it doesn’t look good on your report. Rather than taking this path, it’s better to pay under protest and go to small claims court. Don’t get sued, though, as lawsuits and judgments are also major dings to your credit.
Consolidate your debt if you can’t pay it off quickly.
The scoring criteria treat installment loan balances kinder than the same balances on a credit card. But be wise with your credit card balances and avoid running them up.
Take debt off your credit report entirely.
This is a tough one, but family, friends, or dipping into your retirement plan is sometimes a good way to get credit off your report entirely. Be careful about dipping into your 401k. If you borrow from a 401k and repay it there are no tax consequences, but if you withdraw money, there will be tax consequences.
Don’t close accounts or let them be closed.
It might not help your scores and could hurt them. If you’ve got a card you haven’t used for a while, take it out to dinner or buy a tank of gas, just make sure they’re included with your other automatic payments.
Don’t apply for credit you don’t need.
At about five points an application, if you have sketchy credit, it can add up.
Depending on how bad your score looks today, you might need to invest some time—but there is hope. Just remember, your credit score is the first thing any lender will look at before they offer you a small business loan.
Ready to compare business loan options? Apply for a small business loan.
Every small business owner looking for financing should understand the fundamental differences between a business line of credit and a term business loan.
Both types of financing can be useful, but they do serve slightly different business needs. Applying for the right type of capital at the right time ensures that you don’t run into any problems down the road—or create more problems down the road.
Here, we’ll look at term loans and lines of credit, the requirements, benefits, and drawbacks of each, to help you determine which is the right option for your small business.
What is a business term loan?
A term loan is a fixed funding transaction. It is a one-time loan based on the current cash flow of your business (often plus collateral that you pledge to secure the loan).
With a term loan, all of the proceeds are available at the time of closing. The lender bases your payments, interest, and principal on the amortized loan terms. For example, your business might take out a $100,000 loan at an 8% fixed interest rate over a 5-year term. Interest rates and monthly payments on term loans are generally fixed for the life of the loan.
If your term loan is secured (many are), the bank will assume an ownership position on the collateral you offer. This means you cannot transfer or liquidate the collateral you use to secure the term loan until you make the final loan payment.
The typical use for a term loan is to finance a major expenditure. However, it can also be used to cover daily cash flow expenses.
What is a business line of credit?
A business line of credit (LOC) is like a cross between a short-term business loan and a business credit card. When you open a business LOC, the lender approves you for a credit limit on the account. This credit limit represents the maximum amount of money your business can borrow at a given time.
As your business uses its credit limit, less money is available to borrow in the future. But your business can repay the money it borrows (plus interest) and regain access to the same credit line—as long as the business LOC remains in good standing.
As you borrow against the available credit limit, you accrue interest charges each month. You’ll only pay interest on the amount of money withdrawn.
A line of credit has the potential to be a great cash flow management tool. A study by Intuit found that 61% of small businesses face cash management challenges.
Smart uses for a line of credit include stocking up on discounted inventory, financing for marketing campaigns, covering temporary payroll needs, and more.
Making the choice: Term loan or line of credit?
To determine which option is better for your business,start by answering the following questions:
- Why does your business need financing? How do you plan on using the capital?
- What type of products or services do you offer (and what is the life of those goods)?
- Is your business able to satisfy stricter lender borrowing requirements (with regard to credit, revenue, and time in business) or do you need a more lenient approval process?
- Are your capital needs long-term or short-term?
- What is your standing as a borrower (i.e. credit score, time in business, revenue, etc.)?
Based on the answers to these questions, you can decide whether a loan or line of credit is more appropriate.
If you have great credit, along with sufficient revenue and time in business and you want to borrow money to expand your business, a business term loan would be a solid choice. However, if you have credit problems, your business is relatively new, or you need repeated access to a cash flow financing solution, a line of credit is likely better for you.
In some cases, you may have access to a lender who offers both.
When it comes to deciding between your two options, understanding the differences between these financing products is important.
Differences between business lines of credit and term loans
A term loan can be an attractive financing solution due to its competitive interest rates and borrowing terms. That said, lender qualification criteria for a business term loan can be more challenging to satisfy compared to other types of financing for small businesses.
A business line of credit is a flexible funding resource that can be useful for many small businesses. Interest rates may be higher with LOCs compared to some term loans and other business financing options, but lender qualification standards are often more forgiving as a tradeoff.
The key differences generally lie in what costs are included, and how you're required to repay your loans.
Lender requirements
Ideally, in either case, you’ll have a credit score above 700, annual revenue that exceeds $100,000 and have been in business for at least 2 years. Depending on the lender, however, these levels may vary. There are always options.
The recommended minimum requirements for each are generally as follows:
Repayment structure
Term loans offer many benefits to small businesses, including the fact that borrowers can often repay the funds they borrow over a longer period of time. Lenders typically require borrowers to make monthly (sometimes bi-weekly) payments with term loans. Longer repayment structures with less frequent payments can be friendly for investments in business growth that take time to provide returns.
Lines of credit allow business owners fast access to capital during a time of need.
As a tradeoff for speedy and flexible financing, business owners must often repay the money they borrow over a shorter period. In addition to expedited repayment terms, the payments themselves may also occur on a more frequent basis. Some lenders may require borrowers to make weekly payments toward the money they borrow from their LOC, though others may offer a less demanding payment structure.
Interest rates and fees
Term loans often feature lower interest rates than other types of business financing, including lines of credit. At the time of writing, you might find interest rates as low as ~6% with a business term loan, depending on your creditworthiness and other factors.
In addition to the interest rate a lender charges on your loan, it’s also important to factor in additional fees that could increase your overall costs. That might include origination fees, application fees, late fees, and prepayment penalties, as well as factoring fees and factor rates.
If you’re comparing term loans from multiple lenders to search for the best deal available, this free business term loan calculator from Lendio can help you crunch the numbers.
Lines of credit often feature higher interest rates compared to business term loans and other sources of financing. Interest rates commonly range between 8% and 24% on business LOCs.With lines of credit, many lenders also charge annual fees, origination fees, maintenance fees, late fees, and other expenses. So, read the fine print before you sign any financing agreement. You can also use this free line of credit calculator from Lendio to compare the cost of multiple business LOC options.
When should you apply for a business term loan?
If your business needs financing for any of the following reasons, a term loan is likely the better fit.
- Opening a new location - Expanding to a new business location requires a sizable upfront investment that might take time to produce a profit. A term loan can help you amortize the investment over several years.
- Hiring new employees - A term loan is a great way to handle the upfront costs associated with bringing on new staff and can provide a cash cushion for your business to manage increased payroll expenses.
- Renovations and capital improvements - A term loan can stretch out upfront renovation costs, enabling your business to continue to run without a sizable cash outlay.
When should you apply for a business line of credit?
The following situations are examples of when a business line of credit could be helpful to a business.
- Cash flow management - Many small businesses struggle to bridge the gap between accounts payable and accounts receivable. With a line of credit, a business can use this resource to pay its vendors and repay the funds it borrowed once its customers pay their invoices.
- Seasonal sales cycles - Businesses that have a busy season could use a line of credit to ensure a cash cushion during slower months.
- Inventory purchases - A business can draw on the line of credit to purchase inventory and pay it down when it sells the inventory at a later date.
The last thing to keep in mind– term loans and business lines of credit are not your only two options. Although these are two of the most popular and useful small business funding resources available, there are other types of small business loans you can consider if you feel like your business needs alternative financial resources.
Starting a new business can be an exciting journey, but it also comes with its own set of challenges. One of the biggest hurdles can be securing the right funding to get your startup off the ground. As a small business owner with poor credit, it can be even more difficult to find the financing you need. However, there are still options available to you. In this article, we’ll explore the possibilities of getting a startup business loan with no credit check or poor credit, as well as alternative forms of financing to consider.
Getting a business loan with no credit.
When you apply for a business loan, many commercial lenders will review your credit history to get a sense of how you’ve handled debt in the past. Reviewing previous credit history and checking your credit scores helps lenders predict risk. The problem for many entrepreneurs is that their new business hasn’t yet had a chance to establish a track record when it comes to managing credit obligations.
If a lender’s usual qualification metrics are based on longevity (aka time in business and length of credit history), they need to take a different approach for startups. Rather than look at business credit, a lender may focus on your personal credit score and overall business experience instead.
This alternative approach to risk assessment can work because a business owner’s personal credit scores can also provide a lender with valuable predictive analytics. At its core, a credit score (both business and personal) is a formula that lenders use to predict whether you’ll repay the money you borrow as promised. And that key information—the likelihood of repayment—is what a lender really wants to know when you apply for a loan.
The best small business loans with no credit check.
There are many loan products available to small business owners. Yet entrepreneurs with low credit scores or those who prefer to avoid a credit check for other reasons often find the most success with invoice factoring, ACH loans, or business lines of credit.
The qualification criteria for the three financing options above depend less on your credit scores and more on other factors. This doesn’t mean you will receive an automatic approval even with a very poor credit score. But if you have experience in your industry and some positive credit history, you may have a fighting chance at qualifying.
Below are some important details to consider regarding these three financing options:
1. Invoice factoring
With invoice factoring, the majority of lenders do not have a minimum credit score requirement. As a result, your application for funding from a factoring company may not involve a credit check at all. Here’s an overview of how this financing option works.
Invoice factoring involves selling your company’s outstanding B2B invoices to a financing company for cash. In general, a factoring company might advance you 70% to 90% of the value of your invoices. The factoring company then works directly with your client to collect the money owed when the invoice due date arrives. Once it collects the funds, the factoring company will return the remaining balance to you, minus a factoring fee (often 3% to 5%).
Lenders don’t typically check your credit when you’re seeking financing through an invoice factoring arrangement. Instead, the credit of your customers could matter. With this type of financing, a factoring company will collect payment from your customers, not you or your business. Therefore, your customer’s creditworthiness could impact your ability to qualify for financing and the fees a lender charges you as well.
2. Revenue-based financing
Revenue-based financing (sometimes called a business or merchant cash advance) could be another financing solution to consider if you need business financing for bad credit or no credit. Most lenders that issue revenue-based financing require a minimum credit score of 500 to 625. (These lenders often perform only a soft credit inquiry that won’t impact your credit score.) However, a handful of providers may not require a credit score review at all.
Revenue-based financing is so popular among entrepreneurs because of their rapid funding speed. Once a lender approves you, you can often receive your loan proceeds within a couple of days. This funding agility can present a substantial advantage for a small business in the startup phase.
Of course, just as with ultra-fast sports cars, you are likely to pay a premium for the speed of cash advances. On either a daily or weekly basis, the lender will take an agreed-upon amount from your bank account as an ACH deduction. The amount you can borrow tends to be lower than the loan amounts you might receive via other financing options. But many small business owners feel that the trade-off is fair, thanks to the convenience of revenue-based financing.
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3. Business lines of credit
Lenders are likely to review your credit when you apply for a business line of credit (LOC). However, some lenders will only perform a soft credit inquiry to assess your business LOC application. (Remember, soft credit inquiries do not have any impact on your credit score, unlike hard credit inquiries that have the potential to impact your credit score.) Other lenders may perform a soft credit check for the pre-approval process and follow up with a hard credit inquiry at the time of funding.
In some cases , when you apply for funding through a service provider you already use, they can make decisions based on the data already available.
When researching a business line of credit, you’ll notice it's similar to a business credit card in a few ways. An LOC comes with a credit limit, often ranging from $1,000 to $500,000. Depending on the lender, you may have access to the funds within one to two weeks. The financing typically has a one- to two-year maturity.
Perhaps the best feature of a business LOC is its flexibility. If your restaurant needs a new fryer, buy it. If you need to hire employees, go for it. If you want to bulk up your inventory, do it. Nearly any expense that goes toward starting and sustaining your business is fair game.
Like credit cards, this type of financing also gives you access to revolving credit. This differs from most loans, which provide you with a lump sum of money upfront. With an LOC, you simply use the credit line whenever necessary. There’s no pressure to spend it, and you’ll pay interest only on the funds your business borrows.
Work to bolster your credit score.
It’s true that invoice factoring, ACH loans, and sometimes even business lines of credit can provide financing even when your credit is unimpressive. But that’s no reason to accept the status quo. You should put effort into improving your credit.
Working to earn better credit could open doors to you in the future. Not only can good credit help you qualify for more loan products, but it may also help you receive more favorable interest rates and repayment terms from lenders.
Paying credit obligations and vendor accounts on time is the best way to improve your business credit scores. (And, of course, you’ll want to make sure those accounts report to the credit reporting agencies.)
To maintain a stellar payment history, sign up for automatic payments whenever possible. If you can’t sign up through the payee, consider adding them to your banking system. At the very least, set up a regular calendar reminder so you won’t be forced to rely solely on your memory.
Alternative financing options
1. Crowdfunding – Crowdfunding is a way to raise money online by collecting small amounts from numerous people.
2. Family and Friends – Small business owners can borrow from family and friends, but there are risks. If the business fails or the loan can’t be repaid, important relationships may suffer.
3. Grants – Small businesses and startups may find it appealing to apply for grants as they don't need to be repaid. Although challenging, winning a grant isn't impossible.
4. Angel Investors –An angel investor funds small businesses in exchange for equity. It's a good option when businesses need more funding than they can get from friends and family, but not enough to attract venture capitalists.
5. Venture Capitalists – Venture capitalists provide funding to startups and receive a percentage of the company’s equity in return. Venture capitalists are typically looking for businesses with high-growth potential and a solid business plan.
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