Best business loans for bad credit of April 2024

If you own a business, chances are you’ll need to borrow money at some point to purchase equipment or inventory, maintain cash flow, or cover unexpected expenses. But what happens if you have bad credit? Can you still get a business loan?

Luckily, the answer is yes. There are several lenders that offer business loans for borrowers with bad credit. As with any type of loan, it’s important to do your research and make sure you understand what you’re getting into before signing any paperwork. If you think this is the right choice for you and your business, the best business loans for bad credit listed below may be a good fit.

*APRs are estimates and will vary depending on the borrower.

Best business loans for bad credit

OnDeck

OnDeck offers a short-term business loan of up to 24 months for business owners who need a quick boost. Applicants will need a personal FICO score of 625 and a business income of at least $100,000 per year, and they can choose to borrow as little as $5,000 or as much as $250,000. Once the loan is approved, payments can be made daily or weekly, which gives borrowers more flexibility to meet their needs.

Bluevine

Business owners who don’t need to borrow a lump sum of cash may want to consider Bluevine’s business line of credit. Once approved, borrowers can request and receive funds within a few hours, and repayments will be debited automatically, either weekly or monthly. Business owners can qualify for a Bluevine line of credit with a FICO credit score of 625 and up, and credit lines can be as high as $250,000.

Fundbox

Qualified applicants could be approved for a business line of credit from Fundbox in as little as three minutes. Fundbox offers lines of credit up to $150,000 and requires applicants to have a personal FICO score of at least 600. Other requirements include annual revenue of $100,000 or more and 6 months or more in business (though some business owners may be granted exceptions).

Fora

Fora offers working capital loans up to $1.5 million and has a low minimum credit score requirement of 500. Borrowers can qualify for a discount if they pay their loan off early, and once they’ve paid off at least 60% of the initial loan amount, they have the opportunity to increase the amount they’re borrowing. Business owners can use a Fora working capital loan to fund day-to-day operations, such as purchasing inventory or equipment, managing expenses, and maintaining cash flow.

Credibly

Business owners have several options with Credibly when it comes to financing their operations. The lender offers loans as low as $5,000 to as high as $400,000, as well as business lines of credit up to $250,000 and merchant cash accounts up to $400,000. This makes it a solid choice for business owners with varying needs when it comes to borrowing money. Credibly has a minimum credit score requirement of 500, which makes it a realistic option for those with less-than-steller credit.

Types of bad-credit business loans

Small business owners with bad credit still need financing to buy equipment, launch a new product, boost their marketing, or add inventory. Less-than-stellar credit means loans will come with higher interest rates, so it’s a good idea to scout all the options for different types of loans and financing. Here are some of the most popular types of bad-credit business loans:

• Term loans.
• Microloans.
• Business lines of credit.
• Equipment financing.
• Invoice financing.
• Invoice factoring.

How to get a business loan for bad credit

If you have bad credit, you may worry that you won’t qualify for a business loan.

1. Check your credit score

Before you even think about applying for a business loan, you need to check your credit score. You might think you know your score, but it can change month to month depending on your financial behavior. Knowing your credit score can help prepare you for the application process—and if your score is too low to qualify for a loan, you can work on improving it so you can qualify for a loan more easily down the road.

2. Determine how much you can afford to borrow

In addition to checking your credit, you need to examine your finances closely so you know how much you can afford to borrow. If you take on a loan that you can’t afford to pay back, you’ll end up in a worse situation than when you first needed to take out the loan. When coming up with a number, consider the loan term, interest rate, fees, and repayment schedule. It’s best to go into any loan with your eyes open.

3. Research eligibility requirements

Once you’ve found a loan that seems to fit the bill, look into eligibility requirements to make sure you can qualify. Lenders will look at the length of time you’ve been in business, your average monthly revenue, the strength of your cash flow, and the type of collateral you can put up to secure the loan.

4. Look into options to bolster your application

When you have bad credit, you may need to do more to convince a lender to approve a loan. For example, if you have a lot of collateral, you could offer to put it up to secure the loan, even if the lender doesn’t require it. Alternatively, you could find a cosigner with a higher credit score to help share the responsibility of repaying the loan.

5. Shop around

Once you are ready to apply for a loan, it’s a good idea to shop around. Different lenders will offer different terms and conditions, and shopping around can help you find the best fit. Look at the interest rates, repayment schedule, types of loans offered, and qualification requirements for each lender. You can also look into each lender’s reputation for additional peace of mind.

6. Apply

Once you’ve done all the research and legwork, it’s time to apply for the loan. Make sure you have all the supporting documentation you need ready before you start applying.

Pros and cons of getting a business loan for bad credit

All types of loans come with pros and cons, and business loans are no exception. The following are the advantages and disadvantages of getting a business loan when you have bad credit.

Pros

• This type of loan typically provides funding quickly—within 24 to 48 hours in many cases.
• A bad credit business loan can help you achieve your business goals.
• If the lender reports to the credit bureaus, a business loan could help build your credit.

Cons

• Business loans for bad credit usually come with high interest rates.
• Loans may also come with added fees like an origination fee.
• A bad credit score may mean you will only qualify for a lesser amount.
• Some bad credit business loan lenders may not report to the credit bureaus.

When should you get a bad credit business loan?

There are many scenarios that make getting a bad credit business loan a good idea. Below are some examples of times a business owner may choose to go this route.

• A construction business needs to purchase new equipment to replace older pieces that are no longer performing.
• A seasonal business needs to maintain cash flow during its slow season.
• A business with a physical location wants to remodel its offices to make it more appealing to customers.
• A retail store needs to purchase additional inventory to stock up in anticipation of supply chain issues.

Of course, there are dozens of scenarios where a bad credit business loan may be necessary. If you’re on the fence, it can help to speak to a financial adviser or a loan officer to determine the best option for your situation.

Where to get a business loan with bad credit

In addition to online lenders, other funding possibilities exist for businesses with bad credit. If you have trouble getting a traditional loan from a bank or credit union, you might be better off working with an online or nonprofit lender. Another possibility is a microloan from the Small Business Administration (SBA), which may be easier to qualify for than other SBA-backed loans. A government program — community development financial institutions (CDFIs) — serves borrowers in minority and low-income communities who may have trouble getting funding from traditional lenders.

Alternatives to business loans for bad credit

If a business loan isn’t an option—or if you’re unable to qualify for one—there are several alternatives to consider, including a merchant cash advance, invoice factoring, or using a business credit card.

Merchant cash advance

If your business does a great deal of credit and debit card sales, a merchant cash advance may be a good option. The lender will give you a sum of money and you’ll repay it with a percentage of your credit and debit card sales. This can be a good option if you’re struggling to get a loan, but merchant cash advances often come with high APRs and added fees that can make the cost of borrowing much higher.

Invoice factoring

Businesses that have unpaid invoices can look into invoice factoring. The lender will essentially purchase unpaid invoices from the business in exchange for a lump sum of cash. You can then use that cash to cover your business expenses.

Business credit card

If you have a business credit card, you may consider using it to cover your business expenses in the short term. Just make sure you have a plan to pay the credit card off as soon as possible or you could find yourself in trouble down the road.

Methodology

To find the best business loans for bad credit, we took several factors into account. First, we looked for lenders that would approve a loan or a line of credit for a borrower with a “Poor” or “Fair” credit score according to the FICO model. Then, we looked at the available loan amounts at each lender, giving priority to those who had a wide range. We also considered the average APR for each business loan to ensure that our choices didn’t have extremely high interest rates that would have a negative effect on lenders. Finally, we looked into each of our finalists to see what made them stand out among the competition. The result was the lenders listed here.

Frequently asked questions (FAQs)

What is a bad credit business loan?

A bad credit business loan is designed for borrowers with less-than-ideal credit scores. Although many lenders require borrowers to have a credit score in the “Good” or “Excellent” range, other lenders will approve loans or lines of credit for borrowers with lower credit scores—some as low as 500, which is considered “Poor.”

What is the easiest SBA loan to get approved for?

An SBA Express loan is typically the easiest to get approved for. However, the eligibility requirements for this type of loan vary from lender to lender, so it’s wise to check with the lender to make sure you’ll qualify.

What credit score is needed for a small business loan?

This will depend on the lender. Some lenders will approve borrowers with credit scores as low as 500, while others will require borrowers to have a credit score of 625 or more.

Do small business loans look at personal credit?

Yes, small business loan lenders typically look at personal credit—but they also take other factors into consideration.