Small Business Loans for Bad Credit

Countless business owners with less-than-perfect credit scores are looking for a lifeline to keep their ventures afloat and thriving. But here’s a glimmer of hope: Bad credit isn’t the end of the road; lenders out there are willing to work with you. 

Our team has identified the best small business loans for bad credit to help you get the funding you need. We’ve also provided practical alternatives if a bad credit business loan doesn’t seem like the right path for you.

Best small business loans for bad credit

Despite having bad credit, small businesses have a variety of lenders they can approach for financial assistance. 

This roundup focuses on five of the best options available, examining their strengths and comparing their products. You can click the lender’s name in the table below to find out more about its small business loan for bad credit—or keep reading for more about all five.

Lender	Minimum credit score
Fundible	500
Credibly	500
Bluevine	625
Kapitus	625
OnDeck	625

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Fundible – Best for high loan amounts

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• Loan amounts of up to $2 million
• Approvals within 24 hours
• Simple and straightforward application process

Fundible stands out in the lending space due to its ability to provide high loan amounts. If your business has substantial financial needs, it may be your ideal lender. 

Its loan approval process is quick, often delivering decisions within a day. The speed, coupled with a user-friendly application process, makes it a worthy consideration for businesses looking for high loan amounts.

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Credibly – Best for fast funding

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• Loan disbursement within 48 hours
• Flexible repayment schedules
• Broad range of loan products

Credibly distinguishes itself with a quick disbursement of funds. After approval, it can deposit funds into your business account in less than two days. This speed, combined with adjustable repayment schedules, can make managing your loan easier.

Credibly also has an extensive selection of loan products, covering multiple financial situations.

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Bluevine – Best line of credit

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• Lines of credit up to $250,000
• Only pay interest on the money you use
• Simple and fast online application process

Bluevine provides substantial lines of credit. Its online application process saves time and simplifies loan underwriting. Bluevine only charges interest on the funds you’ve drawn down from your line of credit, which is a cost-saving benefit to consider.

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Kapitus – Best for loan options

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• Wide variety of loan products
• Transparent terms and fees
• Offers multiple loan extensions

Kapitus excels due to its wide range of loans, catering to diverse financial requirements. 

We like this company for its transparency, offering clear and understandable loan terms and fees. It also gives loan extensions to provide businesses with more financial flexibility.

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OnDeck – Best payment customization

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• Daily or weekly repayment options
• Funding within 24 hours
• Loan amounts from $5,000 to $500,000

OnDeck offers unprecedented customization in its loan repayments. Depending on what works best for your cash flow, you can choose between daily or weekly repayment plans. OnDeck also provides quick access to funds and a broad range of loan amounts to fit diverse business needs.

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What is bad credit for small businesses?

A bad personal credit score is below 650 on the FICO scale, and a bad business credit score is often below 50 on the Dun & Bradstreet PAYDEX scale. Your personal credit score is about your individual money history—how you’ve handled personal debts, such as credit cards or a mortgage. Business credit is about your company’s financial track record. 

Bad credit is a red flag that signals to lenders you’ve had hiccups managing debt in the past. For a small business, this could mean your company has made late payments on bills or loans, or you’ve used up most of the credit available to you.

If your business is new or hasn’t borrowed much before, lenders might consider your personal credit score instead because your business doesn’t have much of its own credit history. So, if your personal credit score is low, it could disqualify you from getting the best rates and terms. 

If you need a small business loan for bad credit, brace yourself for the following: 

• You’ll likely face higher interest rates because lenders are taking a bigger risk with you. 
• You might get offered less money than you hoped for. 
• The lender might ask for a repayment plan that’s quicker than you’d like.

Sometimes, lenders will ask for collateral. This is where you back up your loan with something valuable that belongs to you, such as property or equipment. If you can’t pay back the loan, the lender can take that collateral as a Plan B. 

In other cases, your lender might ask you to sign a personal guarantee that says if your business can’t repay the loan, you’ll cover it personally.

Types of bad credit loans for small businesses

When your small business has bad credit, it might feel like the doors to funding are closed. However, a variety of loan types are designed to help businesses just like yours. Let’s break down the types of bad credit loans for small businesses and who they’re best for:

Type of loan	Best for
Secured business loans	Businesses with assets
Microloans	Startups or micro-enterprises
Merchant cash advances	Businesses with credit card sales
Invoice financing	Businesses with outstanding invoices
Equipment financing	Businesses needing equipment
Business lines of credit	Businesses needing flexible access to capital

Secured loans

Secured loans are backed by collateral, such as property or equipment. If you can’t pay back the loan, the lender can take the collateral. This type is less risky for the lender, which means it’s easier to qualify even with bad credit. It’s ideal for businesses that have assets to leverage.

Microloans

Microloans are smaller loans, often provided by nonprofit organizations or government entities. They’re perfect for startups or small businesses that need a modest amount of funding and may not qualify for larger loans due to bad credit.

Merchant cash advances

A merchant cash advance gives you an upfront sum in exchange for a portion of your future credit card sales. It’s a fit for businesses with strong credit card sales but poor credit because repayment is based on daily sales volume.

Invoice financing

If your business has many unpaid customer invoices, invoice financing lets you borrow against the amounts due. This can be a quick way to get cash, and your credit is less of an issue because the financing is secured by the invoices.

Equipment financing

Equipment financing is for purchasing business equipment. The equipment itself serves as collateral, which makes it easier to secure with bad credit. It’s terrific for businesses that need new machinery or technology to grow.

Business lines of credit

A business line of credit is a versatile funding option where you’re approved for a maximum amount of capital you can draw from as needed. They’re best for businesses that want a safety net for cash flow or unexpected expenses. 

Lines of credit can be easier to qualify for with bad credit than traditional term loans because you only pay interest on the amount you use. But with bad credit, you might face higher interest rates or lower credit limits.

How to qualify for small business loans with bad credit

Qualifying for a small business loan with bad credit is challenging, but it’s not impossible. You’ll need to be strategic about how you demonstrate your business’s potential to lenders.

1. Know your credit score. Even with bad credit, some lenders might work with you if you’re on the higher end of the “bad credit” spectrum. Gather your credit reports from major credit bureaus to understand where you stand.
2. Prepare a solid business plan. Highlighting your profit and growth potential can reassure lenders you’ll have the funds to repay the loan. Your plan could include market analysis, product or service descriptions, and financial projections.
3. Be ready to show detailed financial statements, including cash flow, income, and expenses. Lenders will want to see that you have a handle on your business finances and enough cash flow to cover loan payments.
4. Consider offering collateral. This could be equipment, real estate, or inventory the lender can seize if you fail to repay the loan. It reduces the lender’s risk and can help you qualify.
5. Look for a cosigner with better credit to apply for the loan with you. Their credit profile could help you get approved, but they’ll also be responsible for the debt if you can’t pay.
6. Be transparent about your credit history. If extenuating circumstances, such as illness or a natural disaster, contributed to your bad credit, let the lender know. Sometimes, a reasonable explanation paired with proof of improved financial management can make a difference.

Remember, different lenders have unique requirements, so don’t let a rejection discourage you. Look for lenders specializing in bad-credit business loans, and be prepared to accept higher interest rates as a trade-off for securing a loan with bad credit.

Our expert recommends

Crystal Rau

CFP®

The biggest error I see when working with small business owners is that if their business finances are a mess, typically, their personal finances are a mess as well. The number one action they can take is to create a system where they make their minimum payments on time every month and reconcile their books on a monthly basis at a minimum. Lenders will feel more comfortable in you knowing your books, how much you have in assets, and what your cash flow looks like.

Alternatives to bad-credit small business loans

If a small business loan doesn’t seem like the right fit—or if qualifying is a challenge due to bad credit—you have other ways to get financial support for your business.

• Business credit card. These are like personal credit cards but for business expenses. They can be easier to get than a loan and can help build your business credit score when used responsibly. But be mindful of higher interest rates, and try to pay off the balance monthly.
• Personal loan. If your personal credit is better than your business credit, you might consider a personal loan or personal credit card. You can use the funds for your business, but you’ll be personally responsible for repayment—not your company.
• Home equity line of credit (HELOC). If you have a good chunk of equity built up in your home, you can borrow against it using a HELOC or home equity loan. But you could risk losing your home if you default on the loan.
• Grant. Look for grants from government agencies, nonprofits, and private organizations. Grants don’t need to be repaid, but they can be competitive and may require your business to meet specific criteria.
• Peer-to-peer lending. Online platforms match borrowers with individual lenders. It’s like getting a loan from several people interested in your business idea rather than one single lender.
• Self-funding. Also called bootstrapping, this is where you fund your business through personal finances and business revenue. It’s slower but means you won’t pay interest on a loan or give up equity to investors.