Frequently Asked Questions

Traditional banks typically require credit scores above 680, while alternative lenders may approve scores as low as 500-550. SBA loans generally require 640-680 minimum. The exact requirement varies by lender and loan type. Higher credit scores (720+) qualify for the best rates (6-12% APR), while scores below 600 face rates of 35-99% APR.

Loan amounts range from $5,000 to $5 million depending on the lender and loan type. Merchant cash advances typically offer $10,000-$500,000. Business lines of credit range from $5,000-$250,000. SBA 7(a) loans go up to $5 million. Equipment financing covers 80-100% of equipment cost. The amount you qualify for depends on your revenue, time in business, credit score, and collateral.

Approval times vary dramatically by lender type. Alternative lenders (merchant cash advances, revenue-based loans) approve within 2-24 hours with funding in 24-72 hours. Traditional bank loans take 2-8 weeks. SBA loans take 60-90 days. Equipment financing approves in 1-5 days. Online lenders typically approve in 1-3 business days.

Basic requirements include: business bank statements (3-6 months), business tax returns (1-2 years), personal tax returns (1-2 years), driver's license or ID, voided business check, and business formation documents. Traditional banks require detailed financial statements and business plans. Alternative lenders typically only need bank statements and basic business information.

Yes, unsecured business loans are available but typically require stronger credit (680+) and higher revenue. Options include unsecured business lines of credit, merchant cash advances, revenue-based loans, and business credit cards. Rates are 5-15% higher than secured loans. Loan amounts are generally lower ($5,000-$250,000 vs. $500,000+ for secured loans).

Yes, multiple lenders specialize in bad credit financing. Alternative lenders approve 60-80% of applications with scores below 600, focusing on revenue and cash flow instead of credit scores. Options include merchant cash advances (approve 70-85% with scores 500+), revenue-based loans (60-75% approval), invoice factoring (based on customer credit, not yours), and equipment financing (65-80% approval with collateral).

Bad credit typically increases costs by 200-600%. A $50,000 loan at 10% APR (good credit) costs $5,000 annually in interest. The same loan at 50% APR (bad credit) costs $25,000. Over a 2-year term, total interest jumps from $10,000 to $50,000. Secured loans and shorter terms can reduce this premium to 100-300%.

Merchant cash advances and revenue-based loans offer the fastest funding, with approval in 2-24 hours and funding within 24-72 hours. These products require minimal documentation (bank statements, ID) and approve 70-85% of applications with consistent revenue. Trade the speed for higher costs: factor rates of 1.2-1.5x (equivalent to 40-150% APR).

SBA loans are government-backed loans where the Small Business Administration guarantees 75-90% of the loan, reducing lender risk. This allows banks to offer lower rates (8-13% APR) and longer terms (10-25 years) than conventional loans. The SBA 7(a) program offers up to $5 million for general business purposes. SBA 504 loans finance real estate and equipment up to $5.5 million. Microloans provide up to $50,000 for startups and small businesses.

SBA loans typically take 60-90 days from application to funding. The process includes: application submission (1-2 weeks to gather documents), lender review (2-4 weeks), SBA approval (10-15 business days), and closing (1-2 weeks). SBA Express loans can close in 30-45 days. Delays often occur during document collection and business valuation.

SBA loan requirements include: 640-680+ credit score, 2+ years in business (some programs accept startups), profitable operations or clear path to profitability, U.S. citizenship or legal residency, business operating in the U.S., reasonable owner equity injection (10-20%), no recent bankruptcies, and business not engaged in speculation or passive investment.

A merchant cash advance (MCA) provides upfront capital in exchange for a percentage of future credit card sales (typically 10-20% of daily receipts). You receive $10,000-$500,000 immediately and repay through automatic daily deductions from card sales. Factor rates range from 1.2-1.5, meaning a $50,000 advance costs $60,000-$75,000 to repay. Approval rates reach 70-85% for businesses with consistent card sales, even with credit scores below 550.

Invoice factoring is selling outstanding invoices to a factoring company at 70-90% of face value for immediate cash. The factoring company collects from your customers and remits the remaining 10-30% (minus fees of 1-5%) when invoices are paid. Credit requirements focus on customer creditworthiness rather than your business credit, making this ideal for B2B companies with bad credit. Costs range from 1-5% per 30 days (12-60% APR equivalent).

A business line of credit is revolving credit that allows you to draw funds as needed up to a set limit ($5,000-$250,000). You only pay interest on the amount drawn, not the entire limit. Interest rates range from 10-79% APR depending on creditworthiness. Lines of credit are ideal for managing cash flow gaps, seasonal inventory needs, and unexpected expenses. Funds can be drawn and repaid repeatedly as long as the line remains open.

Equipment financing provides loans or leases to purchase business equipment, using the equipment as collateral. Lenders finance 80-100% of equipment cost with terms of 1-7 years. Rates range from 8-30% APR depending on equipment type, down payment, and credit. Approval rates reach 65-80% for bad credit borrowers because the equipment secures the loan. Equipment must be essential to operations and hold resale value.

Leasing requires lower upfront costs ($0 down vs. 10-20% for loans), preserves working capital, includes maintenance/upgrades, and offers 100% tax deductibility. However, you never own the equipment and total cost is 15-30% higher. Buying builds equity, costs less long-term, allows Section 179 tax deductions (up to $1.16M in 2024), and gives you ownership. Buy if you'll use equipment 5+ years; lease if you need frequent upgrades or want to preserve cash.

Working capital is the money available to fund daily business operations—the difference between current assets and current liabilities. Businesses need working capital to pay employees, purchase inventory, cover rent/utilities, and bridge gaps between paying suppliers and collecting from customers. Working capital loans ($5,000-$500,000) help businesses manage seasonal fluctuations, take advantage of bulk purchase discounts, and maintain operations during growth phases.

Improve cash flow by: accelerating receivables (offer early payment discounts, tighten payment terms from 60 to 30 days), delaying payables (negotiate longer payment terms with suppliers), reducing inventory (implement just-in-time ordering), cutting unnecessary expenses, securing a business line of credit for emergencies, and using invoice factoring to convert receivables to immediate cash. Monitor cash flow weekly and maintain 3-6 months of operating expenses in reserves.

Build business credit by: 1) Incorporating your business and getting an EIN, 2) Opening a business bank account and credit card, 3) Establishing trade credit with suppliers (Uline, Grainger, Quill) who report to business credit bureaus, 4) Making all payments on time for 6-12 months, 5) Monitoring your business credit reports (Dun & Bradstreet, Experian Business, Equifax Business), 6) Keeping credit utilization below 30%, and 7) Gradually adding more credit accounts. Building strong business credit (Paydex 80+) takes 12-24 months.

Personal credit (FICO score 300-850) is based on your individual credit history and affects personal loans, mortgages, and credit cards. Business credit (Paydex 0-100, Experian 0-100) is based on your company's payment history and affects business loans and vendor terms. Lenders check both for small business loans. Strong business credit (Paydex 80+) allows you to qualify for financing without personal guarantees, protecting personal assets and credit.

APR (Annual Percentage Rate) is the yearly cost of borrowing including interest and fees, expressed as a percentage. A $100,000 loan at 10% APR costs $10,000 per year in interest. APR allows you to compare different loan products fairly. For example, a merchant cash advance with a 1.3 factor rate ($50,000 advance costs $65,000 to repay over 6 months) has an APR of approximately 60%. Always compare APR, not just interest rates or factor rates.

Common fees include: origination fees (1-6% of loan amount), application fees ($0-$500), underwriting fees ($500-$2,000 for larger loans), closing costs (1-3% for real estate loans), prepayment penalties (0-5% if you pay off early), late payment fees (5% or $25-$50), and annual fees for lines of credit ($50-$500). SBA loans charge guarantee fees (2-3.75%). Always request a full fee disclosure before accepting any loan offer.

Yes, each application triggers a hard inquiry that reduces scores by 2-5 points for 12 months. However, FICO treats multiple inquiries within 14-45 days as a single inquiry for rate shopping. Apply to 3-5 lenders within a 2-week window to minimize impact. Soft credit checks (pre-qualification) don't affect scores and should be used first to narrow options. Most business owners see minimal long-term impact if they're approved and make on-time payments.

Most lenders check both personal and business credit, using the lower score for underwriting. Established businesses (2+ years) with strong business credit (Paydex 70+) may qualify based primarily on business scores. Newer businesses rely heavily on owner personal credit. Building both simultaneously provides maximum flexibility and lowest rates. Use business credit when possible to protect personal credit and separate business/personal finances.

Yes, debt consolidation is a valid use for business loans. Consolidating multiple high-interest debts (credit cards at 25% APR, merchant cash advances at 80% APR) into a single lower-rate loan (15-30% APR) can save thousands in interest and simplify cash flow. However, lenders may restrict this use or require the consolidation to improve debt-to-income ratios. Ensure the new loan has a lower APR and doesn't extend repayment so long that you pay more total interest.

Yes, but options are limited. Startup-friendly options include: SBA microloans (up to $50,000 for startups), equipment financing (if purchasing equipment), business credit cards ($5,000-$50,000 limits), personal loans used for business, friends/family loans, and crowdfunding. Most traditional lenders require 2+ years in business. Expect to provide a detailed business plan, financial projections, and personal guarantee. Consider starting with a business credit card to build credit before applying for larger loans.