Whether a business with credit problems can get funding depends on the lending partner, the product and the rest of its finances; no one can say before a partner reviews the application. Partners generally weigh credit alongside revenue, cash flow, time in business and existing debts. Rockstone Lending, a small-business funding broker in Yuma, Arizona, does not predict approvals. Call (928) 436-5545 or apply online.
The honest answer
Whether a business with credit problems can get funding depends on the partner, the product, the rest of the business's finances and the nature of the credit problems themselves. A late payment several years ago and a recent default are not the same thing, and partners don't treat them the same way.
What that means in practice: anyone who promises approval before reviewing your business, or tells you credit doesn't matter, is telling you something they cannot know. Arizona law prohibits certain loan brokers from making false or misleading statements about the likelihood that a loan or credit will be granted. Rockstone Lending does not predict approvals, and you should be cautious of anyone who does.
Personal credit and business credit
Personal credit
For many small businesses, partners review the owners' personal credit. A small business's own credit history is often thin, and owners are frequently asked to sign a personal guarantee, which makes their personal track record relevant. Personal credit reports show how you have handled credit cards, loans and other accounts, including late payments, collections and public records.
Business credit
Businesses can also have credit files with commercial credit bureaus, built from things like supplier accounts, business credit cards and loans reported in the business's name. A newer business, or one that has always paid with personal accounts, may have little or no business credit history.
Which reports a partner pulls, and how much weight each carries, is up to the partner.
What partners weigh alongside credit
Credit is rarely the whole picture. Partners commonly look at:
- Revenue and cash flow: usually from recent bank statements, with attention to how steady deposits are
- Time in business: how long the business has been operating and generating revenue
- Existing obligations: current loans, leases and especially merchant cash advances being remitted
- Collateral: for example, the equipment being financed
- The purpose of the money: whether the request fits the business and its ability to repay
A business with strong, steady revenue and a credit blemish presents differently from one with both weak revenue and credit problems. How a partner balances these is its own decision; our guide to what sets the amount of funding shows how the same factors shape an offer's size. Our documents guide explains what partners look for in your records.
How credit can affect the options and terms
Credit history can affect more than a yes or no. It can also affect which products a partner is willing to offer and the terms it sets, including cost, collateral and guarantee requirements. In general terms:
- Equipment financing is usually secured by the equipment itself, so the asset is part of the partner's evaluation.
- Lines of credit and unsecured working capital rely more on the business's cash flow and credit, since there may be no specific asset behind them.
- For a merchant cash advance, which is not a loan, funders focus heavily on sales volume and consistency, and many also consider owner credit.
If an offer comes back with terms that look expensive, compare the total cost with any alternatives before you accept. Taking on costly funding to solve a short-term problem can make the credit picture harder, not easier.
What you can do before you apply
- Check your credit reports. The Federal Trade Commission says AnnualCreditReport.com is the only website authorized to fill orders for the free credit reports you are entitled to by law. Look for accounts you don't recognize and errors in payment history.
- Dispute errors with the credit bureau that reports them, and keep copies of what you send.
- Be ready to explain. If there is a past problem with a clear cause and resolution, a short written explanation gives a partner context.
- Get your business records in order, so cash flow can speak for the business. See the documents checklist.
- Avoid stacking. Taking a new advance or loan while existing ones are still being paid adds to the payments partners will see.
Credit checks when you apply
If a lending partner checks credit as part of its application, the partner is the right party to explain what kind of inquiry it makes and how it may affect your credit. Ask before you authorize it. The form on this website asks only for basic details about you and your business. It does not ask for your Social Security number or authorize a credit check.
Red flags to watch for
- Promises of approval before anyone has reviewed your business
- Claims that your credit won't be looked at, followed by requests for your Social Security number
- Pressure to sign before you have read the full agreement
- Offers that won't state the total amount you will repay or deliver
- Requests to send sensitive documents by ordinary text message
How Rockstone Lending helps
Rockstone Lending connects you with lending partners; partners make credit decisions and set rates and terms. We can't promise an approval or predict how a partner will view your credit. What we can do is talk through your situation honestly, explain which types of funding are worth exploring, and put your request in front of partners that offer them. See how the process works or start an application.
By Rockstone Lending · Updated
