Our picks for the best business loans for bad credit
Best for fast business loans for bad credit
625
,
6
months in business and $50,000 in annual revenue.
Best for business lines of credit for bad credit
600
or higher. This revolving line of credit is available in amounts up to $150,000 with repayment terms of 12 or 24 weeks. You can access funds as soon as the next business day after approval — and unlike some credit lines, you won’t pay draw- or account maintenance fees.
Best for short-term business loans for bad credit
Why we picked it: OnDeck’s short-term business loan is available in amounts up to $250,000 with repayment terms up to two years. This product can be a good choice for specific, one-time investments in your business. Although OnDeck requires daily or weekly repayment, payments are fixed and don’t change over the course of your loan.
Best for long-term business loans for bad credit
8.49
% to
24.99
%.
Best for startup business loans for bad credit
570
and at least
6
months in business. Fora also doesn’t require physical collateral, which can be helpful if your business doesn’t have significant assets to offer as security.
Best for invoice factoring for bad credit
Why we picked it: AltLINE offers invoice factoring for business-to-business companies that have outstanding invoices to submit. Like other factoring companies, AltLINE underwrites your application largely based on the creditworthiness of your customers, the age of your receivables and the value of your invoices — as opposed to more traditional requirements. In fact, AltLINE does not set minimum requirements for your personal credit score, time in business or annual revenue. The lender may, however, still consider these factors as part of your application.
Best for equipment loans for bad credit
575
. You should, however, have at least
24
months in business and annual revenue of $250,000. Triton Capital also doesn’t require a personal guarantee, which means your personal assets won’t be at risk with their equipment financing.
Best for working capital loans for bad credit
SBA microloans
Best for SBA loans for bad credit
8
% to
13
%, SBA microloans can be more affordable than other bad credit loan options.
What is a bad credit business loan?
What is a bad credit score?
There are several factors that can bring down your credit rating, including missed payments or bankruptcies, as well as the age of your credit accounts and the mix of credit types on your report.
Types of bad credit business loans
Here are some of the most common types of bad credit business loans.
Short-term business loans
Business lines of credit
Equipment financing
Invoice factoring
Microloans
Merchant cash advances
Pros and cons of bad credit business loans
Bad credit business loans help your business access capital you may otherwise not get to boost operations, grow your business or cover gaps in cash flow.
Making payments on a business loan can also help build and improve your business credit, which can help you qualify for more business funding in the future.
Bad credit business loans offer fast access to capital — some within as little as 12 hours of applying.
Because they are considered higher risk, lenders may not approve high loan amounts on bad credit business loans.
Bad credit business loans typically have higher rates and fees than traditional loans.
You may be asked to pledge collateral on a bad credit business loan to offset some of the lender’s risk.
Where to get a business loan with bad credit
Banks and credit unions likely won’t approve you if you have bad credit. But these alternative sources may let you get a business loan with a less-than-ideal credit history.
Online lenders
Some factoring companies, for example, don’t require a minimum credit score because their underwriting processes are based largely on the value of your invoices and the creditworthiness of your customers. Similarly, merchant cash advance providers may be particularly flexible with credit score requirements because repayment on their products is automatic, based on your debit and credit card sales.
In general, online lenders offer easier approvals and faster funding than other business lending options, but they typically charge higher rates — even for those with good credit.
CDFIs
Nonprofit and community lenders
If you have bad credit, you may be able to get a business loan from a nonprofit- or community lender. Because profit isn’t these organizations’ primary driver, they may be more willing to lend to business owners with a thin or uneven credit history.
Some nonprofit lenders also participate in the SBA microloan program and may work with newer businesses that have rocky credit histories. Many of these lenders focus on issuing loans to traditionally underserved businesses in their communities.
Although nonprofit and community lenders may offer smaller loan amounts than more traditional options, they typically offer competitive interest rates. Most of these lenders also provide educational and support resources for small-business owners, including training and mentoring.
How to get a business loan with bad credit
-
Looking for errors on your credit reports and disputing them with the appropriate credit bureau.
-
Making debt payments more frequently.
-
Paying down or paying off debt.
If you can’t wait for funding, here are seven steps you can follow to get a business loan with bad credit.
1. Calculate how much debt you can afford
First, you’ll want to determine how much debt you can reasonably afford. Lower credit scores may result in higher interest rates, which can make it difficult to repay a new loan — and leave you worse off financially than you were when you started.
Your repayment schedule and term length will dictate the size of your payments, but also how much interest you end up paying. A shorter term means larger payments, but less interest, whereas longer terms mean smaller payments, but more interest over the life of the loan.
2. Check your credit score
3. Understand additional eligibility requirements
Most lenders will consider the following:
-
How long you’ve been in business.
-
What your annual revenue is.
-
How strong your cash flow is.
-
What kind of collateral you can provide.
4. Research and compare business loan options
You may be able to find bad credit business loans from online or nonprofit lenders. As you explore different options, you should compare them based on available loan types, interest rates, fees and repayment terms.
You’ll also want to consider how fast a lender can provide funds, their reputation and customer service, as well as qualification requirements.
5. Consider offering collateral or adding a cosigner
Once you’re ready to start the application process, you’ll want to prepare to bolster your business profile in any way possible to help increase your chances of approval.
6. Gather your documentation and apply
To complete your loan application, you may need to provide some, if not all, of the following:
-
Basic information about you and your business.
-
Personal and business bank statements.
-
Personal and business tax returns.
-
Business financial statements.
-
Detailed information about your collateral, if applicable.
🤓 Nerdy Tip
Be wary of any lender that tries to rush you through the application process and/or won’t show you terms and rates upfront. Predatory lenders tend to take advantage of businesses that are having trouble getting financing — and they may try to promise guaranteed approval. You should also watch out for red flags such as aggressive phone calls or companies that refuse to answer questions.
7. Review your business loan agreement
It may be helpful to have a business advisor or lawyer read through the agreement as well.
Alternatives to bad credit business loans
If you’re not sure that a bad credit business loan is right for you — or you simply want to explore other options — you might consider the following:
-
Small-business grants. Grants provide free access to capital that doesn’t need to be repaid. Grant applications can be competitive, but awarding organizations don’t typically evaluate businesses based on their creditworthiness. You can find business grants from federal and state governments, private corporations and nonprofits.
-
Crowdfunding. If your business has a strong customer base or large internet presence, you may be able to leverage your network to get financing. You can use a crowdfunding platform to set up a campaign, providing details about your business and setting a funding goal. Share your campaign with customers, social media followers, friends and family in order to gather donations for your business. In exchange, you typically offer your supporters something in return; you might offer a new product or exclusive access to an event.
-
Angel investors. If you have a unique business idea or plan on growing quickly, you might consider looking for investors to finance your company. Angel investors are usually high-net-worth individuals who fund early stage businesses in exchange for equity. These investors often provide business expertise in addition to business capital. You might also find investor companies that allow you to pitch your business with the hope of getting someone in the company’s network to invest. Although these investors may not prioritize your credit score when deciding whether or not to invest, you’ll likely need to be able to show high growth and profitability potential.