How to Choose a Lender When Banks are Not an Option

How to Choose a Lender

When it comes to finding a lender for a small business loan, you have a plethora of good lending options. The main two types of lending options for small business owners include traditional banks and alternative lenders. The type of lender you end up selecting will often depend on your financial situation, the type of business you have, what your credit looks like, how long you have been in business, and how much money you are looking to borrow.

Here is a brief overview of what a small business owner that does not meet traditional lending requirements should look for when choosing a lender as the most likely choice for the very few with excellent credit will be their local bank. The great thing is that there are several alternative lending options on the market for business owners with bad credit, and obviously you want to secure a loan with the best lender that matches your credit needs.

Here is a quick rundown of requirements you should make sure your alternative lender meets before settling on a lender.

No Good Credit Requirements

The main reason to opt for an alternative lender is they are willing to lend to you, despite any problems with your credit score. Although alternative lenders do provide merchant cash advances with bad credit, some have minimum score requirements such as a 650 FICO score. When choosing a lender, pick one that doesn’t have high credit requirements put in place in order for you to get a loan.

Rather than judging your ability to pay back the loan based on your credit score, a good alternative lender will instead ask for proof that your business has been operating for at least 2 months and that you show proof of gross monthly revenues (usually a minimum of at least $2,000).

A solid bad credit business lender will put faith in your business skills and ability to make money, rather than only lending to you if you have a certain credit score.

Variety of Lending Options

Small business owners have a variety of different funding needs. For example, one small business may need a working capital loan for short term cash requirements while another small business needs an equipment loan. Similarly, the type of loan you need now vs. the type of loan you may need in the future will often vary.

When selecting an alternative lender, make sure the lender offers a variety of lending options including, but not limited to the following:

  • Merchant cash advance
  • Line of credit
  • Equipment loan
  • Professional practice loans
  • Working capital loan
  • Installment loans
  • Franchise start-up loan
  • Private business loans
  • And more!

The more diversified the loan options are, the more you can count on that your lender is legitimate and experienced.

Transparency About Interest Rates and Fees

When it comes to finding the right business loan, there are two very common mistakes small business owners make when choosing an alternative lender. The first one is that most alternative lenders do not offer loans with an interest rate, what actually is offered is a factor rate where they purchase your receivables up front at a discount. The second common mistake is that borrowers only look at the factor rate and they do not consider any of the other fees involved. These fees will be additional costs not included in the factor rates charged, such as origination fees, application fees, guarantee fees, late payment fees, check processing fees, underwriting fees, prepayment penalties, and potentially more depending on your lender.

When choosing a lender, pick one that is transparent about not only their factor rates, but all the fees involved in securing the funding. It may be tempting for you to select a big name alternative lender, but when all is said and done, it is better to select a lender that lets you know exactly how much you will be paying in interest rates, additional fees, and potential penalties over the life of your business loan.

Helpful Customer Support Team

When you secure a small business loan with a lender, there will be times when you want to contact a member of a support team for help. Maybe you want to make a payment early and see if there are pre-payment discounts, perhaps you have a question about when your funding will come, or maybe you will want to inquire about rates and fees. Regardless of what your potential customer service need might be, the last thing you want is to call into your lending company and never get to talk to a human or having to wait 2 hours to get someone on the line.

When choosing a lender, you should look seriously into how accessible their customer support team is to you. Before sealing the deal, make sure the lending agent provides you with a customer support number, an email address, and that they have visible contact information listed on their website.


If you are a small business owner with bad credit and you are looking for a business loan, there are several options available to you. Just make sure when you choose a lender you find one that doesn’t require you to have good credit, offers a variety of lending options, is transparent about their fees and rates, and provides you with top-notch customer service.
For more information about getting a bad credit business loan from a lender that is transparent throughout the entire lending process contact Shield Funding today!