financial analysts

The Advantage of No Credit Check Financing for High Risk Merchants

A credit check – also known as credit history check – occurs when a financial institution or other lender views your credit history, credit score and other accounts (e.g. FICO score). This process involves the financial institutions analyzing and making note of specific financial transactions. For example, whether you’ve made payments on time – or at all. They will also check to see whether any bankruptcies have been filed.

You should be aware that any large credit infractions (e.g. missed or late payments) stay on your credit report for a minimum of six years. These credit infractions are also known as derogatory marks; the more you have, the riskier your credit history will be in the eyes of lenders. Ultimately, your credit check determines whether you can qualify for traditional financing. If your “too risky” from the bank’s perspective, your application will be rejected.

Bad Credit vs. No Credit

It’s important to note that bad credit is different than having no credit, and is therefore handled differently by lenders. Bad credit is established over time by having derogatory marks on your credit report (late or non-payment, bankruptcy, accounts that have gone into collections, etc.). No credit, on the other hand, means you have yet to establish a history of credit. There’s neither positive or negative information on your credit report for lenders to see.

Why Do Credit Checks Matter?

As a small business owner, it isn’t just your business’ credit history and credit score that are examined – a good personal credit history is critical as well. Why? Banks typically look beyond a business’ credit situation and check the business owner’s personal credit. Thus, even if your business pays its bills on time, failing to meet your personal financial obligations will have negative implications for your business’ ability to secure financing.

When a financial institution pulls your credit report for a credit check, bad or no credit can result in the following limitations:

  • Denied loan and credit applications
  • High-interest rates (loans and credit cards)
  • Higher insurance premiums
  • Hard to approve for new apartment or home
  • Unable to launch business startup
  • Paying security deposits for utilities

The advantage of working with an alternative lender like First American Merchant is that your business can secure the business funding it needs quickly, with no credit check. FAM’s no credit checking financing gives merchants access to merchant cash advances and ACH loans without the endless documentation requirements and long wait times for funding. FAM can provide cash in as little as 72 hours. Don’t let bad credit, no credit or being part of a high-risk industry slow you down.