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by Fundid on Sep 11, 2023 8:00:00 AM
Are you looking for a loan but are worried that your personal credit score is too low? Don't worry; there are still plenty of options available. Finding the right loan can seem intimidating when your credit score is below 650, but don't feel discouraged. An informed decision based on current loan terms and offers can help you find the right loan for your financial situation. In this guide, we'll discuss some of the best loans to consider if your personal credit score is below 650 so that you can make an informed decision when it comes to borrowing money.
Finding the Right Loan for Your Business
As a small business owner with a credit score below 650, choosing the right loan requires careful consideration. It's essential to understand your business needs, the amount you require, and the repayment period that suits your financial condition.
First, you must decide what type of loan you need for your business. Are you simply looking for capital? Are you wanting to purchase new equipment? We've compiled a list of common loan types to help guide you toward the best kind of loan for your business.
- Working Capital Loan:
A working capital loan is a specialized type of loan designed to meet the everyday operational expenses of your business. Unlike long-term loans, which are commonly used for big investment purposes like equipment or real estate, a working capital loan covers costs such as payroll, rent, and debt payments. This type of loan is particularly beneficial for businesses with cyclical sales patterns that may need to offset short-term cash flow inconsistencies. Remember, this loan is meant to finance daily operations, not to buy long-term assets or investments. - Equipment Financing Loan:
An equipment financing loan is a specific type of loan designed to help businesses acquire the necessary machinery, vehicles, or technology needed for operation. This kind of loan is advantageous as the equipment purchased serves as collateral, meaning the lender can repossess the equipment if the loan is not repaid. It's an attractive option for businesses that need expensive equipment but do not have the upfront capital to purchase it outright. These loans typically have competitive interest rates and flexible repayment terms, allowing businesses to spread the cost of equipment over its lifetime while preserving cash flow for other operational expenses. - Small Business Administration (SBA) Loan:
The Small Business Administration (SBA) Loan is a type of government-backed business loan provided by private lenders, but partially guaranteed by the U.S. government. This guarantee reduces the risk to the lender, enabling them to offer more flexible terms and lower interest rates compared to conventional loans. SBA loans are especially beneficial for small businesses with lower credit scores as they can access sizable funds, usually for long-term purposes such as starting a new business, purchasing real estate or equipment, or even refinancing existing debt. - Term Loan:
A term loan is a monetary loan that is repaid in regular payments over a set period of time. These loans are often used for specific investment purposes, such as financing a significant acquisition, an expansion project, or a long-term investment that can potentially enhance a company's value. Term loans can be short-term (up to one year), medium-term (one to three years), or long-term (more than three years). The interest rate can be either fixed, meaning it remains the same over the life of the loan, or variable, meaning it can fluctuate based on market conditions.
The Right Lender for Your Business
Now that you've had time to decide what kind of loan you are interested in, we've compiled a list of our preferred partners that provide access to capital for those with a credit score under 650.
Accion Opportunity Fund Working Capital Loan:
Accion Opportunity Fund is a non-profit organization that supports small business owners with affordable loans and training to grow their businesses. Their working capital loan program helps businesses with low credit scores to access funds ranging from $5,000 to $150,000, thus enabling them to pursue their business objectives. The loan terms are flexible, and the interest rates are reasonable, starting at 5.99%. In addition, they offer free loan consulting to help you make informed decisions.
Basic requirements:
- 570+ FICO credit score
- $4,200+ monthly revenue
- 1+ year in business
Dream Spring True Grit Growth Loan
Dream Spring is a community-based lender that provides loans and training to businesses in underserved areas. Their True Grit loan was built for business owners with lower credit scores. With this loan, eligible businesses can access $10,000 in unsecured, low-interest, fixed-rate terms. Besides, Dream Spring offers one-on-one mentoring and counseling to assist you in making smart financial decisions.
Basic requirements:
- 600+ FICO credit score
- No minimum revenue requirements
- No time in business requirements
Dream Spring Small Business Loan
Dream Spring also offers a small business loan! This type of loan can range from $1,000 to $250,000 with a 24-72 months term and a fixed interest rate. This loan is designed to help business owners with a credit score below 650, access necessary funds for their businesses.
Basic requirements:
- 600+ FICO credit score
- No minimum revenue requirements
- No time in business requirements
Lendio Line of Credit:
Lendio is an online marketplace that connects small business owners with lenders. Their line of credit is designed for businesses that need access to up to $150,000 in funds on an ongoing basis. Furthermore, repayment terms are flexible, and the interest rates are competitive. Get started with Lendio today to manage cash flow, cover unexpected expenses, or invest in growth opportunities as needed and only pay interest on what you use.
Basic requirements:
- 560+ FICO credit score
- $4,200+ monthly revenue
- 6+ months in business
Securing the right type of loan for your business can be a strategic move that helps support your company's growth and sustainability. Whether you're seeking funds for daily operations, equipment financing, starting a new venture, or managing unexpected expenses, there's a suitable loan option available. By considering factors such as your business's credit score, revenue, time in operation, and specific financial needs, you can select from lenders like Accion Opportunity Fund, Dream Spring, or Lendio that provide loans tailored to your requirements.
How to Check Your Personal Credit Score
There are several ways to check your personal credit score. The first way is to sign up for an online service such as Experian or Equifax that offers free access to your credit report and score once a year. By signing up with one of these services, you can monitor your score over time and take steps to improve it if necessary.
You can also contact one of the three major bureaus—Equifax, Experian, or TransUnion—and request a copy of your report. Lastly, some banks offer free access to customers with their accounts at those institutions; be sure to ask if this service is available at yours!
Find Funding for Your Business Today
Finding the best loans when your credit score is below 650 might seem challenging, but there are plenty of lenders working to provide access to capital for small business owners with flexible requirements. The financial lenders mentioned in this guide offer affordable financing options with reasonable repayment terms and interest rates tailored to small businesses. However, they are only a few of the lenders on the market today. If you didn't discover the right option for you in this guide, check out our Capital Marketplace to review your other options!