Looking for a small business loan? Your personal credit score is going to be a big part of whether you can qualify. For those fortunate enough to have a good personal credit score, more options are open, with better terms and higher amounts. Good credit business loans are well within reach.
Good Credit Business Loans:
1. Term Loans
A term loan is generally what we think of when we have bank loans in mind. A term loan provides borrowers with a lump sum of cash upfront in exchange for specific borrowing terms. These are normally for established small businesses with sound finances. In exchange for a specified amount of cash, borrower agrees to a repayment schedule with a fixed or floating interest rate. This small business loan may require substantial down payments to reduce payment amounts and the total cost of the loan.
Advantages of term loans include good interest rates and often much longer payment terms. The disadvantages of such a small business loan include less flexibility.
Approval amounts will vary, although banks may potentially go to $1 million. No matter what, you cannot have bad credit. Expect to provide collateral, although the type will vary. The financials you will have to provide are going to depend on the lender, but you should expect to provide some documentation. Often, this is, at the very least, a business plan and tax returns.
Qualifying for such a small business loan means providing well-prepared documentation as requested and having a Fundability Foundation™ for your business. Hence, your business needs an address where mail can be delivered, its own phone number(s), an EIN, a D-U-N-S number, etc. When it comes to documentation, be sure to have an accounting professional work with you on preparing tax returns—at the very least. An accountant is well worth the cost.
Why Choose a Term Loan for Business Financing?
A term loan offers the stability of regular, fixed payment amounts. This should make business budgeting a lot easier. And did you know that term loans also can be negotiated? Hence you may be able to get a variable rate if you believe interest rates are going to go down. Term loans also often have higher limits than a small business line of credit.
Unlike with a bad credit business loan, a term loan will have a longer payment term and lower interest rate. The loan amount will nearly always be higher.
It’s a no-brainer that not having bad credit beats poor credit every single time. Having term loans as an option—rather than a merchant cash advance—is one of the reasons. Better than bad credit also means not having to rely on other forms of small business financing, like a merchant cash advance or equipment financing.
Term loans often come from banks, so interest rates are going to be tied to the Prime Rate.
Banks are established businesses, unlike some alternative lenders. This is not to say that alternative lenders are, by nature, untrustworthy. But with banks, you will not have to do as much investigating. More about alternative lenders later.
2. SBA Loans
Note that the Small Business Administration will require collateral in addition to not having bad credit. But SBA loans should still be on your radar, as they have lower interest rates and high available loan amounts.
SBA loans offer some of the longest payback terms available for business financing. You can secure loans for ten, fifteen, even twenty years with the SBA, and get one of their popular CAPLines. In many cases interest rates are as low as 5 – 6% on the funding you secure.
Established businesses with tax returns showing good revenues and profitability can get very large sums of funding with a secured small business loan. If you have positive business tax returns, you should apply for secured government-backed SBA program loans. They run from $250,000 up to $12,000,000. SBA offers several programs. These include 504 and 7a loan programs you may qualify for. Use SBA programs for many purposes including buying a new business, partner buyouts, real estate acquisition, and even working capital.
The SBA will require certain documentation to qualify including business and personal financials, resume and background information, personal and business credit reports, a business plan, bank statements, collateral, and other documentation relevant to the transaction. Approval amounts will vary based on the collateral their business has and the amount of net profit reflected on their tax returns.
But keep in mind it’s not a fast small business loan. In fact, the total time to close these loans is about two to four months.
Why Choose an SBA Loan?
Approval amounts can go to $12 million. You can’t have bad credit no matter what. The necessary collateral for these loans will be 50% of the loan amount. All necessary financials will depend on the lender but expect to provide documents such as bank statements, a business plan, and an up to date profit & loss statement.
One of the biggest advantages of SBA loans is that the Small Business Administration guarantees a portion of the loan. A lender has an incentive to go higher when it comes to the loan amount.
Like with term loans, SBA loans offer fixed payment terms. This makes it far easier to budget and plan for the future. SBA loans also have interest rate caps. As a result, as interest rates increase, your loan is protected. It also means an SBA loan can still be a good deal even as rates are rising elsewhere. Hence, if you are unsure about taking out a loan from the SBA, this can buy you some time. But not forever.
Disadvantages to SBA loans tend to be the purposes for which you can use them. For example, the 504 loan is for fixed assets. A 504 loan cannot be used for:
- Working capital or inventory
- Consolidating, repaying or refinancing debt
- Speculation or investment in rental real estate
As a result, house flippers are shut out of 504 loans.
Another disadvantage is you must have exhausted other means of getting funding, including your own personal assets, before becoming eligible.
3. Credit Line Hybrid
With this business line of credit program—a type of credit card stacking program—you can get approval for up to $150,000 in 0%, unsecured, no-doc, business financing. It has no collateral or cash flow requirements. This program can help clients get funding based strictly on personal credit quality. Lenders will not ask for financials, bank statements, business plans, resumes, or any of the other burdensome document requests that most conventional lenders demand. You can get approval with introductory interest rates that can go as low as 0%.
Lenders are only going to look at your or your credit partner’s personal credit quality. It needs to be very good personal credit with no open collections, late payments, tax liens, judgments, or other types of derogatory items on the reports. You should also have fewer than five inquiries on your credit report within the last six months. And you will need established credit. This includes open revolving accounts now showing up on your credit report with balances less than 40% of your limits. Lenders often want to see a personal credit score of at least 700.
Most lenders will charge very high interest rates on unsecured financing. This is understandably due to the risk of the business owner not pledging collateral for security. But most of our exclusive unsecured funding offers very low introductory interest rates. These can be as low as 0% for the first 6 – 18 months.
In fact, a 0% interest rate is common for the first 6 – 18 months.
Why Choose the Credit Suite Credit Line Hybrid?
Most unsecured lenders charge high amounts of points ranging from 12 – 30%. They also charge application fees for such small business line financing programs. But our exclusive lenders offer the lowest fees in the industry, ranging from 9 – 12%. You only pay them any type of a fee if you are approved and have gotten your funding. Pay an interest rate of 5 – 29% after the initial period. The actual rate depends on risk.
You can use company credit to qualify. Enjoy 24 hour pre approval. Even startup businesses can qualify, as well as an existing business. This is a true NO DOC financing program. Go from application to funding in three weeks or less. There is typically no application fee. Get credit approvals for up to $150,000 per individual. Even multiple signers can get approval. There are no collateral requirements. Credit partners can also apply. There are no cash flow requirements.
Approval amounts can go up To $150,000. To qualify, you cannot have poor credit. But there’s no collateral required.There are no financials required.
Even startup businesses can qualify. And you can even build corporate credit with this program. Use it for equipment financing if you like.
4. House Reseller Financing
Another form of good credit business loan is house reseller financing.
House Reseller Financing is also called rehabilitation loans. Enjoy a quick closing and high loan to values with our rehabilitation loans. Rehab loans are tailored for the real estate investor who wants to buy, rehab, and flip residential properties. Using the property as collateral, funds are available for short term residential renovation projects that most traditional banks and credit unions won’t approve.
There is no prepayment penalty, so you can sell the home faster and pay off the entire loan without any cost to you whatsoever. For approval, you should have prior and recent flipping experience. Lenders will ask you to list your recent projects verifying that you have recent experience of selling two homes or more.
Also, you should be liquid. Lenders want to see that you have money in the bank. You will have to put funds into an escrow account for security. The amount of liquid funds varies based on project, but you should only apply if you have at least $30,000 in liquidity now. Lenders will want to verify that you are requesting 65% or less of the after-repair value of the property.
Technically, even borrowers with average credit will qualify. But we are suggesting that good credit is better, as you may not have to show as much flipping expertise and still be able to qualify. Lenders will weigh all factors and, as might be expected, not having bad credit always helps.
Why Choose House Reseller Financing?
Given that SBA loans are not available for property rehabilitation, house reseller financing is a good alternative. It’s a far better option than other means of funding which flippers often use, like home equity loans, investment property business lines of credit, revolving credit lines, seller financing, bridge loans, cash out refinances, permanent bank loans, and hard money loans.
Hard money loans often have a short loan term and high interest rates. Without bad credit, you should not have to settle for funding choices with either. And, a home equity loan can potentially jeopardize personal assets. And you should not have to do that if you don’t have bad credit.
This type of funding also means you would not have to take out a personal loan or max out a credit card or credit cards. And, you won’t have to settle for a short term loan you would have to pay off long before you were ready.
5. Vehicle Financing
This is a way to get a business vehicle without having to wait until you can pay cash. A small business owner may be required to personally guarantee vehicle loans. If you are a co-borrower then the loan could report to your personal credit report. Some loans have prepayment penalties. It is a good idea to have a loan proposal to detail your business, loan needs, and financial statements.
One choice is Ford Commercial Vehicle Financing through Credit Suite. Ford offers loans, business lines, and leases. Ford may request a PG if you are not approved on the merit of your application. Apply at the dealership. Ford reports to D&B, Experian, and Equifax.
You need a Fundability Foundation and a good Experian business credit score. Experian business credit, in part, comes from how good your FICO score is. A good personal credit score helps lead to a good Experian business credit score, too.
Another choice is Ally Car Financing via Credit Suite. Ally provides personal financing but also report to corporate credit bureaus. If your business qualifies for no-PG financing, then you can get financing in the business name only. Ally reports to D&B, Experian, and Equifax.
To qualify for an Ally Commercial Line of Credit, you need a Fundability Foundation, bank reference, Fleet financing references, and a PAYDEX credit score of 80 or better.
If a personal guarantee is used Ally won’t report to consumer credit bureaus unless you default paying for their business lines of credit.
Why Choose Vehicle Financing?
Not having bad credit means it’s highly unlikely that your vehicle financing application will not be approved on its merits. As a result, it is less likely that you would be asked for a personal guarantee. There’s nothing wrong with personal guarantees, but you should only use them when you truly need them. Quite literally, you want to get the best bang for your buck. Good consumer credit will allow you to save your personal guarantee for another time. A good personal credit score makes this possible.
Why Alternative Lenders Are So Popular
There are a few reasons why alternative lenders have gained popularity in recent years. One is absolutely the convenience of simply Googling an online lender and then submitting an application. Often, these lenders can be speedier when it comes to decision making.
Alternative lenders are also growing in popularity because they are less likely to refuse an application based on industry risk or low cash flow. Despite an owner’s excellent consumer credit, a bail bonds or construction company can be a hard sell to a lender. In fact, some lenders may have decided to specialize in a particular industry. Small businesses in the cannabis industry, for example, are not likely to get term loans from banks any time soon. Yet cannabis business lenders are out there.
But keep in mind, one downside to alternative lenders is that they are not well known and may not have a long history in the business. It’s always smart to diligently check companies you don’t know about. If a lender will not answer your questions to your satisfaction, you are under no obligation to work with them.
Also, the products an alternative lender offers could be everything from a merchant cash advance to a short term loan. They may not have the best loan type for your business. In fact, they may not have every possible financing option out there. But in all fairness, an alternative lender wouldn’t be the only sort of lender to not offer every loan option.
How to Choose the Best Loan for You
Start like when choosing a personal loan. What’s the interest rate for the small business loan? For instance, a working capital loan isn’t for long-term investment. Rather it is for short-term financial goals. And you may be able to cover some of that with business credit cards. So, consider your purpose and plans—and then hard numbers like interest rate, loan term, and how much you can get. Just because you can get lots of money from one lender doesn’t necessarily mean it’s the best option for your business.
After crunching the numbers, choosing the right lender and loan will most likely come down to personal preference. For a term loan or an SBA loan, if you can get either from the bank where you have your business bank account—and all the other variables look good—then that is probably the best way to go. This is because banks have their own internal scoring system and ratings. Using more bank products like a small business loan can help your business out. Better bank ratings can help you get a second small business for more money later. There are reasons to choose where you already have your business bank account which go beyond simple convenience.
How Good Business Credit Can Help
As another positive for your application, good corporate credit will add to a lenders’ reasons for saying yes. A faster yes means you don’t waste your time with lenders not interested in giving your business money. And speeding up the process for getting money for your business is a worthwhile goal. The combination of good consumer credit and good company credit is like a one-two punch. While it is not a guarantee of approval, it does increase your odds.
Good business credit is also helpful due to what you have to do in order to build it. This means building a Fundability Foundation™, applying for and using starter vendor business credit cards, and monitoring your credit score and reports. Smart and responsible financial stewardship is yet another positive for lenders.
Also, having a high limit business credit card or more is one more positive for a small business loan provider.
Another way good corporate credit helps is by making it easier to qualify for our Credit Line Hybrid. It could be the best small business loan option for your business.
Takeaways
Good personal credit is an asset. You get considerably better choices for business financing. It even helps raise your Experian business credit score. Lenders always appreciate a good record of managing your own finances when considering whether to loan money to your business.
Responsibly managing your personal finances, in addition to carefully managing your business finances, opens up funding opportunities beyond options like equipment financing. You will get more money faster, have longer to pay it off, and at better interest rates. And perhaps most importantly of all, you’ll have choices and won’t have to just settle for the only lender willing to take a chance on you and your business.
