Building Your Business Business Loans You Can Get Without a Credit Check How To Fund Your Business Without a Hard Credit Inquiry By Nora O'Malley Nora O'Malley Website Nora O'Malley covers small business finance and entrepreneurship topics for The Balance. Along with her writing work, Nora is an entrepreneur and consultant who opened an all-tap wine bar in New York's East Village dubbed Lois and owns a sophisticated snack food business Aida. For her businesses, Nora is responsible for finances, marketing, operations, and fundraising. Along with The Balance, her writing has appeared in Thrillist, Insidehook and Vinepair. learn about our editorial policies Updated on July 30, 2022 Reviewed by Robert C. Kelly Reviewed by Robert C. Kelly Robert Kelly is managing director of XTS Energy LLC, and has more than three decades of experience as a business executive. He is a professor of economics and has raised more than $4.5 billion in investment capital. learn about our financial review board Fact checked by Kiran Aditham In This Article View All In This Article How Business Loans Work PayPal Working Capital American Express Working Capital Square Working Capital FundThrough Photo: Maskot / Getty Images Businesses of any size often require loans for working capital, equipment purchases, or long-term growth, and there are many loan products available that can help fund your business’s needs. Most of these loan products have one thing in common, however: They require a credit check for each applicant. If you prefer to explore funding opportunities that do not require a credit check, there are still plenty of options. Each type of funding, though, can have different requirements, terms, and rates, so it’s important to evaluate each on what the repayment burden means for your business before making your decision. Key Takeaways Small business loans might not always be the best fit for funding your business, especially if you’re just starting out and can’t show significant business history. There are financing options for small businesses where owners can skip a credit check but still qualify for capital to help with cash flow. PayPal, Square, and FundThrough are a few of the companies offering nontraditional loan products. Many of these options are through private payment processors and require some history with the company, so they’re best suited for companies that have generated revenue for at least one to two years. How Business Loans Work Business loans are a crucial element to both large and small businesses. At different points in the life of your company, you may need some extra working capital. Or perhaps you’re looking to scale in a way that’s only feasible with a sizable investment in equipment or real estate. In cases like these, business loans can be an important component to your financial plan and can create a helpful safety net as your company grows. The first step to securing a business loan is to assess your financial history and viability. Lenders may want to see your personal and business credit scores (if applicable), any collateral that may be used to secure the loan, and financial statements showing the health of your company. In almost every case, a bank will check an applicant’s personal credit history. Certain banks will not consider applicants with personal credit scores less than 650 or 700, so it’s important to have an idea of your credit health before beginning the loan application process. Once you apply, the bank or lender will pull your credit history, usually using a hard credit check, which is when a lender requests to review your credit reports once you’ve applied. Note A hard credit check can affect your credit score and remain on your credit history—in some cases for two years—so make sure you’re committed to the loan you’ve chosen. If approved for a business loan, you’ll receive the specific terms, interest rates, down payment (if any), and penalties associated with your loan. However, if traditional loans aren’t the right fit for your business, there are still many options for securing funding, as outlined below. PayPal Working Capital One of the best places to look for a capital infusion without a credit check is with your payment processor. If you’re one of the more than 30 million businesses that use PayPal, you will likely qualify for a working capital loan. Loan limits: Loans are based on your PayPal account history. A business can borrow up to 35% of its annual PayPal sales. First-time borrowers can borrow up to $150,000, and subsequent loans max out at $200,000.Rates and fees: Borrowers will pay a single fixed fee determined by the loan total, PayPal history, and the selected repayment percentage. Borrowers can select 10%-30% of daily sales as the rate for paying back the loan.Term length: There is no maturity timeline; the loan is repaid once the balance and fixed fee have been repaid using the selected percentage of sales.Eligibility: Applicants must have a PayPal Business or Premier account for at least 90 days, and process at least $15,000 in annual PayPal sales for Business accounts or $20,000 for Premier accounts. PayPal working capital loans have no effect on your credit score, require no collateral or personal guarantees, and application and approval should only take a few minutes. It’s worth considering if you are in need of gap funding and are sure future sales will support the repayment requirements. Note If your daily sales slow to zero, you are not required to pay anything. However, you will need to pay a minimum of 5% or 10% every 90 days to keep the loan in good standing. In addition, this option is only available for businesses that choose PayPal as their payment system, which may not be the right fit for every company. American Express Working Capital American Express offers a variety of programs aimed at helping small businesses maintain positive cash flow. While some, such as AmEx Merchant Financing, require a credit check, the American Express Working Capital option allows current customers access to bridge funding without dinging your credit. Here are some specs: Loan limits: $1,000 to $750,000Rates and fees: 0.5%-3% depending on the length of the loan term, payment, and purchase history with AmExTerm length: 30, 60, or 90 daysEligibility: Must be an active American Express Business Card holder who uses their card relatively frequently; vendors or customers must be set up to accept American Express. American Express Working Capital is aimed at creating flexible options for positive cash flow. If your timelines for accounts payable and accounts receivable do not align, AmEx Working Capital can keep you in good standing with your vendors and allow you to maintain positive relationships with your customers. With this option, businesses never see loans in their bank accounts. Instead, if vendors are set up to accept American Express, AmEx will pay your vendors directly within five days. You then have 30, 60, or 90 days, depending on the term of your loan, to collect funds from your customers to repay the loan. Approval for these funds is generally easy and does not require a separate credit check. However, the loan amounts plus associated fees must be paid in full at the end of the relatively short term, which can pose a problem if your receivables are not up to date. Square Working Capital Square has become a popular point-of-sale and payment processor for small businesses since launching in 2009. While the company formerly offered flexible merchant cash advances, it now offers small loans called “Square Capital.” Loan limits: $300-$250,000, depending on your history of sales with the Square platformRates and fees: Square enacts a one-time fee of, on average, 10%-16% of your loan; exact fees and repayment rates are determined by the amount you choose to draw.Term length: Loans must be paid in full within 18 months.Eligibility: Must be a Square customer with relatively high processing volume, usually at least $10,000 per year Once a business shows a steady processing volume with Square, it is offered a range of capital it can choose whether or not to collect. The exact fees and repayment rates are determined by the amount a business elects to take, but that burden is made very clear before committing to the loan. These sliding rates are because the loans are designed to be paid back within 15 months regardless of how much a business chooses to take. Daily sales repayment burdens can be hard for small businesses when it comes to managing their cash flows, so Square Capital may not be the best fit for smaller companies that have irregular cash inflow and outflow. If daily sales are not where you expect them to be, there is an option to pay a minimum payment of one-eighteenth of the loan every 60 days, although the loan will still need to be paid in full when it matures at 18 months. FundThrough If your business relies on invoices to meet cash-flow requirements, consider invoice factoring or invoice financing. FundThrough offers two options for using your invoices as collateral: Velocity Invoice Factoring, where customers sell their invoices in exchange for immediate funding, or Express Invoice Financing, which is a loan that uses your open invoices as collateral. Loan limits: Loans are based on the amount of eligible invoices and business cash flow.Rates and fees: For Velocity Invoice Factoring, rates depend on how old the invoice is, and range from 2.5% to 7.5% deducted from the advance; the sooner an invoice is due, the lower the fee. Express Invoice Financing is typically 6%, or .5% every week for 12 weeks.Term length: 30-90 days depending on the invoicesEligibility: Velocity Invoice Factoring is for businesses with $15,000-$10 million in open invoices, and Express Invoice Financing is for businesses with $500-$15,000 in invoices. Invoices must be less than 90 days old. Neither option affects your credit score, so they are worth considering if you operate an accounts-receivable-based business. When you sell your invoices via invoice factoring, you run the risk of your customers having a bad experience dealing with a third party collecting—although FundThrough has a great reputation for customer care. With Express Invoice Financing, you are responsible for the whole loan, so you need to stay on top of your accounts receivables to ensure you have the cash flow to pay back the loan via the 12 weekly installments. This might not be a good fit for companies that primarily serve customers who have trouble paying on time. Note There are other industry-specific options for loans that don’t require a credit check. Rewards Network, for example, offers a merchant cash advance specifically for restaurant clients. It is worth exploring within your specific industry for loan products that are right for you. Frequently Asked Questions (FAQs) What are the average interest rates for small business loans? With Small Business Administration (SBA) loans, for example, interest rates vary depending on the loan program, amount, and term length. All are based on the current prime interest rate, which as of March 2022, was 3.25%. The average rate for the SBA 7(a) loan, the agency’s most common loan, ranges from 5.5% to 8%. What financial ratios and company details will a bank look at when considering a business loan? Banks may consider many factors when evaluating the health of a loan application, including but not limited to the owners’ shares and their personal financial histories (including credit scores); business credit reports and scores; financial statements that show the health of the company; and the amount and value of any collateral or business assets being pledged to support the loan. Was this page helpful? Thanks for your feedback! Tell us why! Other Submit Sources The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy. myFico. "What Is a FICO Score?" Equifax. "Understanding Hard Inquiries on Your Credit Report." PayPal. "PayPal Working Capital." American Express. "American Express Working Capital Solutions." Square. "Banking." Square. "Square Loans Fixed Payback Rate and Minimum Payment Requirement." Square. “Square Loan Eligibility FAQ.” FundThrough. "What Does Invoice Factoring Cost?" Intuit Quickbooks. “FundThrough Invoice Financing.” FundThrough. "How Funding Works." Commerce Bank. “Current Prime Rate: Prime Rate Update.” U.S. Small Business Administration. "Loan Chart October 2020."