Small Business Loans for Bad Credit
- August 16, 2018
- Posted by: Melissa Horton
- Category: Small Business Loans
In many cases, particularly in the first few years of starting a business, small business owners need access to affordable capital to help with expansion, inventory, overhead expenses, and equipment. Getting a traditional loan through a bank or credit union requires strong credit and revenue, and many business owners simply don’t make the cut.
The good news is that there are several small business loans for bad credit available. The influx of online lenders over the last several years has made it easier for businesses of all sizes to get the funding they need for common business expenses, even when credit history is an issue.
Small business owners should understand what it takes to get business loans for bad credit before applying, as well as which lenders offer options for funding and in what amount.
- Best Small Business Loans for Bad Credit
- How to Get a Business Loan With Bad Credit
- Alternatives to Business Loans for Bad Credit
Best Business Loans for Bad Credit
Business loans for bad credit come in a variety of forms from a handful of different lenders, all with varied qualification requirements, minimum credit score thresholds, interest rates, and repayment terms. Business owners looking at business loans for bad credit need to review these differences carefully to ensure the loan is available to them and affordable over the long-run.
Kabbage is an online small business lender offering loans backed by Celtic Bank. Small business owners with less than perfect credit may apply for a loan ranging from $2,000 up to $250,000, with a six or 12-month repayment period. To qualify, small business owners must have at least one year in operation as well as annual revenue of at least $50,000 or $4,200 over the last three months.
Kabbage evaluates the credit history of the business owner but focuses more on the revenue and cash flow of the business to determine eligibility and amount. Small business loans through Kabbage have fixed interest rates, but these are determined on a case by case basis. Applications are submitted online, and approved loans may be funded within a few business days.
Fundbox is another online lender offering business loans to individuals with bad credit. Business owners register for FundBox online and then connect business bank accounts or accounting software platforms to the lender’s system. The lender evaluates the eligibility of each small business customer based on this information, not necessarily their credit score.
FundBox can approve a line of credit for business applicants for up to $100,000 in as little as three minutes. Repayment is over either a 12- or 24-week period through automatic payments. Interest rates on FundBox lines of credit vary depending on the financial information provided by the business owner.
Small business owners may also qualify for a loan despite bad credit with QuarterSpot. The online lender offers comparably lower interest rates and fees to business owners without a check of credit history and without a personal guarantee. The repayment options depend on the qualifications of the business owner, as does the interest rate charged on the loan.
The amount of the loan is also dependent on the business owner’s needs and ability to repay over time. Applications are submitted online, and approved loans may be funded within one business day.
Individuals with bad credit may also qualify for a small business loan through Credibly. As an online lender, Credibly offers business expansion and working capital loans up to $250,000. Small business owners can repay the loan over a period of six to 24 months, depending on the type of loan and the amount.
Interest rates vary depending on the financial details and revenue stream of the business, but they are not wholly based on credit history. Credibly small business loans can be applied for online, and approval may be received in as little as one day.
StreetShares is an online lender offering small business loans to qualified business owners. The lender is unique in that it caters to veteran-owned small businesses, but any business that has been in operation for at least one year may apply. Minimum revenue requirements must be met, and there is a credit check.
StreetShares offers term loans up to $100,000 with repayment terms extending up to 36 months, and funds can be deposited immediately after approval. Applications for a StreetShares loan may be submitted online.
BlueVine offers small business loans via a credit line for qualified business owners. The online lender offers lines of credit up to $250,000 with rates as low as 4.8%, and approval may take place in as little as 20 minutes. Business owners are not required to have a strong credit history or score, but they do need to meet qualification requirements relating to revenue and collateral. Bluevine applications can be submitted online.
Another online lender offering small business financing through loans is SnapCap. The company, backed by LendingTree, offers working capital and inventory loans to businesses, from $5,000 up to $600,000. Repayment terms are available from three to 36 months, depending on the amount of the loan and revenue of the business.
Small business owners applying for a SnapCap loan must have monthly gross revenue of at least $8,500, three months of business bank statements available, and a minimum of six months in operation. The minimum FICO score is 500 for loans through SnapCap. Applications can be submitted online, and funding can be as fast as one business day.
OnDeck is yet another online lender offering small business loans to individuals with less than ideal credit. Through an OnDeck term loan, business owners may receive up to $500,000 in funding with an interest rate as low as 9.99%. The total cost of the loan varies and is dependent on the business owner’s time in operation, revenue, and credit history.
Repayment for an OnDeck business loan can be as short as three months or as long as 36 months. Applications are submitted online, and funding may be received after approval in as little as a few business days.
Small business owners may qualify for a loan through Accion, an online lender providing funding from $300 up to $1,000,000. Loans may be used for working capital, inventory, or equipment purchases, and approvals are based on the company’s time in operation and gross revenue. Accion business loans have varied interest rates as well as repayment terms based on the amount of the loan and business financial information. Applications are submitted online.
Upstart also offers small business loans via an online platform. The lender allows small business owners to borrow $1,000 up to $50,000 based on several factors in addition to credit score and history. Small business loans with Upstart vary in terms of the interest rate and repayment period, but business owners may check their eligibility online.
How to Get a Business Loan With Bad Credit
The first step in securing a small business loan for bad credit is to understand exactly where you stand in terms of your credit history and score. If you have had financial missteps in the past, such as an account in collections, late or missed payments, bankruptcies, or court judgments, you likely have a dinged credit score and spotted report.
With these negative marks come a side-eye from traditional lenders including banks and credit unions. Financial institutions want to lend money to business owners who have a strong track record of on-time payment and responsible management of credit and debt. You will want to check your credit report for these issues, as well as correct any errors that may be dragging your credit score down.
Qualifying for a business loan with bad credit is possible, but often not through conventional lenders. Instead, alternative lenders will review your credit history and score alongside other components of your financial life. Your ability to pledge collateral to help secure the loan, your business revenue, and other personal and business assets may help in receiving approval.
The most helpful aspect of alternative business loan lenders is their ability to approve a business owner based on these factors when credit scores do not meet the minimum qualification requirement of at least 700. Alternative lenders may accept a request for a business loan with credit scores as low as 500 or 530, although this varies from lender to lender. To ensure your application has a good chance of getting approved, check with the lender beforehand on credit score minimums, if any.
Alternatives to Business Loans for Bad Credit
Alternatives to small business loans exist when business owners have bad credit. These may include business credit cards, merchant cash advances, or invoice factoring.
Small business credit cards often do not require a strong credit history, but business owners may not have a credit line large enough to meet their financing needs. Merchant cash advances require daily or weekly repayment from the business’ credit card sales, but they do not require a credit check in most cases.
Invoicing factoring relies on a company’s outstanding invoices to determine the amount of financing available. Fees related to invoice factoring, merchant cash advances, and credit cards are often higher than small business loans. This makes these alternatives less appealing to small business owners who may qualify for an online lender listed above.
The best business loans for bad credit listed above offer alternatives to traditional bank and credit union loans and may be easier to qualify for if credit history or score is an issue. Small business owners may also look to credit cards, merchant cash advances, or invoice factoring for financing needs, but it is necessary to review the total cost for each option.
Before selecting the type of small business financing, be sure to shop around to compare the best small business loans available to ensure you get your business the right option.
Additionally, take the time to understand how your credit impacts each of these factors, and take small steps each day to improve your financial track record. Doing so can help ensure you have more options for small business financing in the future that are both affordable and manageable from a cash flow perspective.