Can I get a business loan without a credit check?

If you need business funding, you might be tempted to look for a no-credit-check business loan. But does such a thing exist? Here’s what you need to know.

Key takeaways

• There is no such thing as a “no-credit-check business loan”, but not all providers run hard credit checks when you apply for funding

• Credit checks exist to protect businesses from taking on too much debt 

• You can use our handy eligibility checker to find out whether you are likely to get a business loan

If you need business funding, you might be tempted to look for a no-credit-check business loan. But does such a thing exist? Here’s what you need to know. 

What are no-credit-check business loans?

No-credit-check business loans refer to loans you can apply for without undergoing a hard credit check. 

If you are looking for one, it probably means you know your credit score is less than perfect. Perhaps because you have not had time to build a credit history or because you’ve had financial problems in the past.

However, all loan providers in the UK conduct some form of credit check on businesses that apply to borrow money. This is because they need to assess whether you are in a financial position to pay off the loan according to their repayment terms. 

Looking at your business’s credit history is one way to do this, because it shows providers how the company has managed its debts in the past. Different lenders have different eligibility criteria – and some are more lenient than others.

Certain lenders consider other factors, including your trading history, annual turnover and the reasons for any black marks on your credit file.

Remember, though, that the loans available to companies with bad credit often come with higher interest rates and stricter terms.

Soft credit checks vs hard credit checks

A hard credit check involves a full search of your credit record. This shows on your credit file, and too many checks — especially in a short period of time — can have a negative impact on your credit score, because they suggest a spate of rejected applications.

A soft credit check gives lenders a quick snapshot of your creditworthiness without leaving a mark on your credit file. It won’t affect your credit score or your chances of being approved for credit in the future.

Can I get a business loan without a credit check?

The short answer is no. UK lenders are legally obliged to ensure they lend responsibly, and that means conducting credit checks of some kind on all business loan applicants. 

This may feel unfair, but it’s a measure that aims to protect businesses from taking on too much debt.

If you’re worried about being turned down for a business loan, it’s probably worth assessing your eligibility using an eligibility checker that carries out a soft credit search to tell you how likely you are to be accepted.

Types of no-credit-check business loans

The business loans you can get without undergoing a hard credit check are often linked to an asset or money owed to the company. 

Loans of this kind include:

• Equipment financing – This is a loan to cover the cost of purchasing equipment, which the lender accepts as security for the loan. The lender sends the funds directly to the equipment vendor, so you can use the equipment as you pay for it. Because lenders maintain a legal claim to the machinery during the loan term, they may not always require a credit check to offer finance of this kind

• Invoice financing – This is where you borrow against the value of your company’s unpaid invoices. You could, for example, borrow 80% of the value of an unpaid invoice, which is then paid to you (invoice discounting) or directly to the lender (invoice factoring). If the lender collects the amount owed from your customer, it then pays you the remaining balance, minus any fees and charges 

• Merchant cash advances – An advance against your company’s future earnings. You borrow a lump sum that you then repay as a percentage of your card sales, plus fees. The amount you can borrow depends on how much you make from card transactions 

• Short-term business loans – If you need emergency funding, your bank may be able to offer you a short-term loan without running a credit check, as long as you are an established customer with a good track record. However, the interest rates on such loans are generally high, making them unsuitable for longer-term borrowing

Alternative forms of business finance

Business loans are just one way to attain funding for your company. If you need a cash injection, other types of business finance you can consider include:

• Small business grants – The big plus of grants is that you don’t have to repay the money and that means no credit checks. There are not many grants available, however, and they are generally limited to specific locations and industries, making it difficult to qualify

• Crowdfunding – You can raise money by offering your financing requirements as an investment opportunity via a crowdfunding platform. Most crowdfunding campaigns are financed by small donations from lots of people, so you don’t have to pass a lender’s credit checks to get the money. However, you must usually incentivise your offer by giving investors shares in the company or rewards, such as free products 

• Friends and family – Those closest to you can be a useful source of business finance, especially when you are first starting out. To avoid souring relationships with your loved ones, make sure you are clear about whether the funds provided are a loan, gift or investment. And plan what to do if you are unable to repay any loans you receive this way

How to check business loan eligibility

You can’t get a business loan in the UK without having some form of credit check.

Before applying, it therefore makes sense to assess your likelihood of approval using a tool — such as our handy ‘No credit score impact’ eligibility checker — that does not leave a mark on your credit file.