A business loan will help you to start or expand your business, but if you don’t have credit, it can be hard to get a good loan. Still, there are other options, like using collateral to secure a loan. In some cases, you may not always be able to get as much money as you wanted, or you may have to pay higher interest rates. Still, if you have a good business plan, you may be able to find a lender that is willing to take a chance on your business.
Below are the Ways to Small Business Loan with No Credit
Open a Business Bank Account
Develop a relationship with a local bank. Large national banks typically have more restrictions than smaller banks that take a more personal approach. Open a business banking account with a local bank and use your account responsibility. This helps you to build your reputation with the bank.
Register your business with the federal government in order to get an Employer Identification Number. This will allow you to build credit as a business of relying on your personal credit history.
Request a Loan
Talk to your bank about a loan. You want a loan that is backed by the Small Business Administration – most banks provide these loans. These are less risky for the bank because the government will help out if you default on the loan. Show the bank representative how you can repay the loan through current cash flow for your business or through the business experience that you have.
Offer Collateral to Lenders
Offer collateral to secure the loan. Without credit, a bank will be wary of lending you money because they cannot be sure that you will repay the loan. If you offer some type of collateral, such as the equipment you will buy with the loan, you become a more attractive borrower.
Find a Co-Signer
A friend or family member with strong credit may be willing to co-sign a business loan with you. This can be a risky proposition: If you can’t repay the loan the bank can go after the co-signer, which can severely damage your relationship. If you have to go this route, consider taking out a very small loan that you know you can repay. Over time, your payment compliance will build your business credit history so that you won’t need a co-signer in the future.
Get a Business Credit Card
Build credit with a business credit card. If you are turned down by the bank due to lack of credit, you may still qualify for a business credit card. The credit limit on this will probably be less than you were looking for, but it will help you to build your credit as a business, making you eligible for loans in the future.
As a last resort, some companies will give you an upfront cash loan in exchange for a certain percentage of your credit card sales. These loans come with high-interest rates but may work for you if you don’t have other options.