Best Business Loans for Bad Credit in December 2023 | LendingTree (2024)

Bad credit doesn’t have to limit your options for business financing. Some lenders offer bad credit business loans to those with credit scores as low as 500.

Lenders use your credit score as a measure of creditworthiness — the lower the score, the higher the risk. As a result, business loans for bad credit tend to be more expensive, though shopping around may help you secure a reasonable rate.

Best business loans for bad credit

Here’s a list of the top lenders offering bad credit business loans.

Learn more about how we chose our picks.

Credibly: Best for high-revenue businesses

If you have high monthly revenue as well as bad credit, Credibly‘s working capital loan might be worth exploring. It offers loans up to $400,000 to address various business needs. In addition, Credibly offers a business line of credit and merchant cash advances (MCAs).

Fora Financial: Best for working capital loans

Fora Financial is our top pick for working capital loans, since it offers up to $1,500,000 with no restrictions on how to spend the funds. Furthermore, Fora doesn’t require collateral and disburses funds as quickly as 72 hours after approval. You can receive a free, no-obligation quote to see if it’s a good fit for your business.

Bluevine: Best for a business line of credit

Bluevine offers a business line of credit of up to $250,000. This loan might be ideal if you anticipate needing access to revolving funds to keep your business afloat. It does require a slightly higher credit score of 625, but Bluevine doesn’t charge extra fees for opening, maintaining, prepaying or closing the account.

QuickBridge: Best for minority-owned businesses

If you’re looking for a minority business loan, QuickBridge offers industry insight, professional advice and finance options specifically designed for women and minority business owners. This alternative lender can provide working capital and term loans up to $500,000, including business loans for bad credit. Once approved, you may be able to receive funds in as quickly as 24 hours.

Fundbox: Best for quick approvals

Fundbox offers quick loans for bad credit: If you’re approved, funds from a business line of credit could be deposited into your business bank account as soon as the next business day. Keep in mind, though, that the max repayment term is only 24 weeks — which might not be long enough depending on your business’s current financial status.

OnDeck: Best for short-term loans

Interested in a short-term business loan? OnDeck can offer up to $250,000 with possible same-day funding, as well as prepayment and loyalty benefits. However, there are stipulations as to what industries it can fund.

Taycor Financial: Best for equipment loans

If you’re looking for equipment like computers or vehicles to power your startup business, an equipment loan from Taycor Financial may be accessible to borrowers with bad credit. If approved, you can receive up to $2,000,000 to purchase or upgrade equipment for your business. The loan comes with flexible payment options, such as deferred and semi-annual payments.

Types of bad credit business loans

Bad credit business loans come in many forms, from traditional term loans to specialized equipment or invoice financing. These types of funding may have low credit requirements or be a collateral loan to reduce the lender’s risk.

Your choices for bad credit business loans could include:

Term loans

A term loan allows you to receive a lump sum of cash to be used for a range of business needs. Online lenders are often more lenient with their small business loan requirements than banks since they tend to look beyond credit scores. In addition, the funding processes are typically quicker.

Secured loans

Business owners usually need to offer up assets as collateral to obtain a secured business loan. Having collateral may help you get a secured loan with poor credit, since the lender can claim the collateral to recoup costs if your business defaults.

Line of credit

A business line of credit — also referred to as a revolving line of credit — acts similar to a business credit card. Once established, you can access extra cash when needed and only pay for what you use.

Working capital loans

A working capital loan can help fund day-to-day operations. Credit requirements for businesses looking for working capital loans may be lower — which may be ideal for bad-credit applicants.

Equipment financing

This loan allows businesses to buy or replace expensive equipment like commercial machinery, vehicles or manufacturing tools. Companies with bad credit (including startups) may be able to finance equipment, since the equipment acts as collateral.

Invoice factoring

Invoice factoring, or accounts receivable financing, lets a business get cash by selling its unpaid invoices to a factoring company. Invoice factoring is lower risk for the lender because your company’s invoices secure the loan.

Merchant cash advances

Businesses with bad credit may consider a merchant cash advance, since lenders will be more interested in a company’s sales figures than credit scores. Once approved, you’ll receive a lump sum that typically needs to be repaid daily through automatic deductions from the business’s credit card and debit card sales. Since the payback is automatic, cash advance lenders receive the funds directly.

How to get a business loan with bad credit

The process to get a business loan with bad credit means finding financing with flexible eligibility requirements. Once you identify a lender that may accept your credit score, here are the general steps to help you secure funding.

Check your credit scores.

Before starting the business loan application process, you can check your personal credit score for free. With this information, you’ll better understand which lenders you can approach.

For established companies, you should also obtain a copy of your business credit report.

Improve your credit to get better rates.

There are many ways to improve your credit score to help unlock more attractive business loan rates and terms.

• Pay your bills on time: Paying promptly (and early, if possible) will do wonders for your credit score. You don’t need to pay the whole balance if it’s a stretch — just make sure to meet the minimum.
• Reduce debt: Though paying the monthly minimum is good, getting all your debt paid down is better. You don’t have to do it at once — just watch your overall spending, and start putting any extra money toward the debt with the highest interest rate. Slowly, you’ll bring your credit utilization ratio down, improving your score in the process.
• Renegotiate interest rates: Consider contacting your creditors to see if they’d be willing to negotiate the interest rate. You can also consider consolidating business debts for better interest rates.
• Monitor your credit: Occasionally, a credit bureau will make an error on your credit report. You can request a copy of your credit report directly from one of the credit bureaus, or you can subscribe to a credit monitoring service that’ll watch your score for you.
• Watch your business credit: Your business also has business credit, which lenders can access — often without your knowledge. Keep an eye on your business credit report to double-check for any mistakes. You can request a report from business credit bureaus like Dun & Bradstreet.
• Get a business credit card: A business credit card may be easier to obtain than a business loan, as some cards don’t have high credit requirements. You may notice a significant improvement to your personal credit score after making on-time payments.

Whether you decide to get a business loan with bad credit or wait until your credit score improves, make sure to stay on top of your payments and keep your eye on your goals. Successfully managing any business loan, bad credit or not, will show lenders that you can handle debt. In turn, you may have more access to better rates and terms for future financing needs.

Calculate how much you could borrow.

Use our business loan calculator to estimate your borrowing power based on your credit score, revenue and time in business. The size of your payments — which could follow a daily, weekly or monthly schedule — are based on your loan amount, interest rate and any additional fees a lender charges.

Business owners with low credit scores typically receive steep interest rates, so keep this in mind when deciding how much funding to request. Taking on debt that you can’t afford to repay will only hurt your credit score further. Securing longer repayment terms could make your payments more affordable — but be careful not to pay an excessive amount of interest throughout the life of the loan. Short-term loans typically require high payments, but you’ll generally pay less in total interest.

Consider a cosigner.

Adding a cosigner with a high credit score can often improve your odds of receiving a business loan. However, not all lenders allow cosigners. Furthermore, it’s a big responsibility for your cosigner, since they’ll ultimately be responsible for the loan if your business defaults. Make sure to discuss the pros and cons with your business partners and your cosigner to ensure everyone knows what’s involved.

Prepare your application documents.

Even if a lender has a low minimum credit score requirement, it may still dig into financial documents like your business bank account statements and tax returns. Be prepared for a lender to ask for one or more of these documents:

• Business plan
• Business and/or personal bank account statements
• Business and/or personal tax returns
• Business registration and licenses
• Employer identification number (EIN)
• Financial statements, including profit and loss, cash flow and balance sheet
• A listing of business assets and liabilities

Applying with these documents could help offset your poor credit and help you appear trustworthy as a borrower. Plus, organizing your paperwork ahead of time could speed up the application and approval process.

Offer collateral to secure funding.

Offering business assets as collateral could improve your chances of being approved for financing. Because lenders can seize the collateral to recoup losses in the case of default, collateral reduces the risk for the lender and gives the borrower a better shot at approval.

Acceptable forms of collateral may include hard assets like equipment, fixtures, inventory or commercial property. Future earnings, such as accounts receivable and unpaid invoices, may be used as collateral. Watch out for loans that may require you to pledge personal assets (your personal car or home, for example) as collateral to secure financing.

Understand your loan agreement.

Make sure you understand all aspects of your business loan agreement to avoid surprises or penalties down the line. Review these critical components of your loan agreement:

• How much you’ll be borrowing and repaying
• The terms that determine your repayment schedule
• Penalties for early or late payments
• Whether a personal guarantee is required, which would make you personally responsible for the debt

If you’re comfortable with your business loan agreement details, you’re ready to move forward with your bad credit business loan.

Factors to help you choose a bad credit business loan

Having bad credit may feel like you have minimal choices when it comes to business financing. However, after shopping for potential lenders, you may find more options than anticipated.

Here are four key factors to consider when looking for a bad credit business loan:

• Loan options: Does the type of loan suit your immediate needs? For example, there’s no point in signing on for equipment financing when you need a business line of credit. You’ll also want to ensure that the funds are enough to support you during this time of need.
• Overall costs: Read the fine print to ensure you understand all included costs, such as interest rate, origination or document fees and prepayment penalties. If you doubt what something means, reach out to the lender for clarification.
• Time to funding: You may need the funds immediately, in which case a 7-day approval process won’t work.
• Compare lenders: Sadly, many sketchy alternative and online lenders are ready to prey on your less-than-stellar credit score. Do your research on prospective lenders by reading lender reviews and customer feedback on sites like Trustpilot and Better Business Bureau.

Where to get a business loan with bad credit

When it comes to finding a small business loan with bad credit, you have several options for where to go:

• Online lenders: Online lenders may be more willing to work with borrowers with bad credit because they don’t have the high overhead that brick-and-mortar banks do. However, if you have questions or problems with your loan, you won’t be able to just walk into a local branch for help.
• Microlenders: A microloan is any loan of $50,000 or less. Nonprofit organizations or government agencies often provide these loans, offering competitive interest rates and fewer fees. For example, the microloan program from the U.S. Small Business Administration (SBA) is designed to help small businesses start up and expand operations.
• CDFIs: Community Development Financial Institutions (CDFIs) are private financial institutions dedicated to helping low-income, low-wealth and other disadvantaged people and communities access economic opportunities. You can find CDFIs that support your local community through the Opportunity Finance Network or a Small Business Development Center.
• Your current bank: Traditional banks tend to have higher credit score thresholds. However, if you have an existing relationship with a bank, it may be willing to consider other mitigating factors, such as positive cash flow, your history with the bank and additional cash resources and reserves.
• Your business cash flow: When you apply for alternatives to traditional small business loans, such as invoice factoring, accounts receivable factoring and merchant cash advances, lenders may not consider your credit score. They’ll be more concerned with your cash flow (the amount of money coming into your business) and possibly the creditworthiness of your customers.

Pros and cons of bad credit business loans

Even if you’re eligible for a bad credit business loan, it might not be the right move for your business. Here are some pros and cons to consider.

How we chose our picks for best bad credit business loans

Lenders featured on our list of best bad credit business loans were scrutinized based on the type of loan product, interest rates and terms, required time in business and minimum revenue.

The loans listed in this review all meet the following criteria:

• Eligibility with a credit score of 625 or lower
• Time in business for one year or less
• Time to funding in less than one week