Getting a Business Line of Credit With Bad Credit

A line of credit can open up many opportunities for a business to grow. Think about not worrying that you may not be able to pay your employees if a client doesn’t deposit their payment on time. Imagine having the cash you need to fulfill a large order and achieve your income goals.

There are many more ways that a line of credit can help your business run smoothly. If you’re worried about credit score requirements, there are still options to consider.

Keep reading to find out how poor credit can impact your ability to secure a line of credit and what you can do to prepare to apply.

Can You Get a Business Line of Credit With Bad Credit?

Yes, there are options for business owners to secure a line of credit even if they have a less-than-stellar credit history. Traditional lenders like credit unions and banks typically require a minimum credit score of 580. But many alternative lenders offer bad credit business loans.

Your credit score is just one factor that lenders look at when assessing your creditworthiness. They also consider your monthly revenue, business plans, and time in business. Online lenders consider your desired loan amount and your company’s cash flow when making decisions to provide business funding, as well.

How Can Bad Credit Impact Your Ability to Get a Business Line of Credit?

The most significant impact of having poor credit is that you may have to pay interest rates higher than the annual percentage rate (APR) you could get if you had good credit. Some lenders may also give you a lower credit limit. But business lines of credit with lower credit limits are typically unsecured, which means you don’t need to put up a down payment or collateral.

However, depending on the amount you wish to borrow, some lenders may ask for a personal guarantee. With a personal guarantee, borrowers make a legal promise to repay the loan if their company can’t afford to do so. Personal guarantees also help new businesses and startups secure loans even if they don’t have qualifying income or a long credit history.

Even though there might be extra steps for you to take, rest assured there are available small business loans even with a low credit score. Speak with a Clarify advisor today to discuss your options for a business line of credit.

Is a Line of Credit the Right Option for Your Business?

A business line of credit works similar to a business credit card: You can borrow and repay funds up to your credit limit as many times as your business needs cash, and you only pay back what you withdraw plus interest. In addition, lines of credit don’t have origination fees or prepayment penalties like other business loans.

One of the main perks of a line of credit as a form of business financing is its flexibility. Unlike typical term loans, a business line of credit isn’t designated for a specific purpose. So, small business owners have immediate access to cash to cover working capital expenses like employee salaries, inventory, and rent.

Also, with short-term loans, you receive a lump sum of cash upfront with regular repayment terms over a fixed period. With a line of credit, your loan payments don’t start until you withdraw. If you don’t use it right away, you don’t need to start paying it back.

This is why some businesses secure lines of credit. It serves as a cash reserve they can access for unexpected expenses like emergencies or a large order that they may not be able to fulfill without additional capital.

Most Common Uses of Business Lines of Credit

Unlike other types of financing, you don’t have to use a line of credit for a specific purpose. This is why we repeat the flexibility of the credit line at every opportunity. You can use it to cover any business expense as you see fit, which may include:

  • Buying inventory and supplies: You can use a line of credit to purchase materials and products to make sure you can meet customer demands. Some businesses also use the cash to buy in bulk as a way to take advantage of supplier discounts and save more money.

  • Equipment financing: You can also use a credit line to buy new or used equipment you need to increase your production or keep day-to-day operations going.

  • Payroll: Most businesses use a line of credit to bridge gaps in their cash flows. For instance, you can use the funds to pay salaries and wages while waiting for customer payments.

  • Taxes and rent: Like payroll, some expenses like taxes and rent can’t wait until customer payments are deposited into the business bank account. That’s why having a line of credit as a cash reserve is a life-saver for businesses.

How to Get a Business Line of Credit With Bad Credit

We know from years of experience that you need significant revenue and your business must be operational for at least six months to qualify for a loan. Most lenders prefer that borrowers have good personal credit scores, but there are still loan options for business owners with bad personal credit.

It’s important to monitor your credit reports to prepare for your loan application or know what’s going on with your financial profile. Check your FICO score from the three credit bureaus — Equifax, Experian, and TransUnion. You can also get a free copy of your credit report at once every 12 months.

If your company has been operational for a while and has its own business bank accounts, it may have established a credit rating. You can get your business credit score from Experian, Equifax, and Dun & Bradstreet.

At Clarify Capital, we exist to help small business owners like you get the funding you need to grow your company. That’s why we make the application transparent, easy, and quick. Take a look at the steps you need to take to apply for a loan with Clarify Capital.

Gather Business Information

To make the application process easier and quicker, make sure you have the following documents on hand:

  • Legal proofs, such as a driver’s license, passport, federal tax ID, or employer identification number (EIN)
  • Proof of income — three to 12 months of recent bank statements
  • Financial statements, like profit and loss (P&L) statements and balance sheets
  • A copy of your business license
  • One to two years of business tax returns
  • One to two years of personal tax returns

Apply for a Business Line of Credit Online

At Clarify Capital, we understand that circumstances beyond your control happen that can affect your credit. Not every bad credit score is a result of mismanaged finances. That’s why we work with more than 75 online lenders with different eligibility requirements.

Most lenders will consider your annual revenue, time in business, and credit history. Some will also consider the stability and profitability of your business before making a decision. You don’t have to have perfect credit to qualify.

Apply online or talk to a Clarify advisor today to discuss available financing options for you.

See How a Business Line of Credit Can Grow Your Business Today

Many companies use a line of credit to cover business day-to-day expenses, such as buying inventory or paying payroll. But the main advantage of a line of credit is its flexibility — you can use it however or whenever your business needs it. If you want to prepare for unexpected expenses, a line of credit also gives you peace of mind.

Apply online or speak to us directly by calling (877) 838-3919 and get the funding you need in as little as 24 hours!

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