Best bad credit business loans of July 2024
“Verified by an expert” means that this article has been thoroughly reviewed and evaluated for accuracy.
“Verified by an expert” means that this article has been thoroughly reviewed and evaluated for accuracy.
BLUEPRINT
Updated 6:12 p.m. UTC June 17, 2024
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While you typically need good credit to qualify for a business loan, there are some lenders that offer business loans to borrowers with shaky credit histories. The best business loans for bad credit of 2024 — including business installment loans and lines of credit — have less stringent credit requirements (generally accepting credit scores of 600 and below).
National Funding
Best business loans for bad credit
- Credibly business loans: Best for long repayment terms.
- Fora Financial business loans: Best for large loans.
- National Funding business loan: Best for temporary cash-flow problems.
- Fundbox business line of credit: Best for ongoing funding.
Why trust our business loan experts
Our team of experts evaluated hundreds of business loan products and analyzed thousands of data points to help you find the best fit for your situation. We use a data-driven methodology to determine each rating. Advertisers do not influence our editorial content. You can read more about our methodology below.
- 24 business loan lenders reviewed.
- 336 data points analyzed.
- 6-stage fact-checking process.
Our top picks for bad credit business loans in 2024
Fora Financial business loans
Fundbox business line of credit
Compare the best business loans for bad credit
| PRODUCT TYPE | LOAN AMOUNT | MIN. CREDIT SCORE | TIME TO FUND (AFTER APPROVAL) | |
|---|---|---|---|---|
Credibly business loan
| Loan
| $5,000 to $600,000
| 501
| As soon as the same day
|
Fora Financial business loan
| Loan
| $5,000 to $1.5 million
| 500
| Within 1 to 3 business days
|
National Funding business loan
| Loan
| $10,000 to $500,000
| 600
| As soon as the next business day
|
Fundbox business line of credit
| Line of credit
| Up to $150,000
| 600
| As soon as the next business day after approval
|
All interest rates and product details are current as of June 11, 2024.
Methodology
Our expert writers and editors have reviewed and researched multiple lenders to help you find the best business loan for bad credit. Out of all the lenders considered, the four that made our list excelled in areas across the following categories (with weightings):
- Loan details: 20%
- Loan cost: 20%
- Eligibility and accessibility: 35%
- Customer service: 15%
- Application process: 15%
Within each major category, we considered several characteristics, including APR ranges, late fees and prepayment penalties, loan amounts, maximum loan terms, minimum credit score requirements, time in operation requirements and funding time. We also evaluated each provider’s customer support options and customer reviews.
What is a business loan for bad credit?
A business loan for bad credit is one offered by lenders to borrowers with poor or fair personal credit scores. These lenders look at several qualification criteria in addition to your credit — including your annual business revenue, operating history and previous business lending history — to determine if you qualify.
In general, it can be easier to qualify for a bad credit business loan through an online alternative lender compared to a traditional bank or credit union. Most provide a speedy application process. This makes it possible to receive a lending decision in as little as four hours after submitting all necessary documentation, depending on the lender. If you’re approved, you could get your funds as soon as the same or next business day.
Keep in mind: While bad credit business loans can provide essential funding, the interest rates and fees are often substantially higher compared to those of good credit loans. You might also be required to make daily or weekly repayments, depending on the type of loan and the lender — which could be too aggressive for businesses with variable income or thin profit margins.
What’s considered bad credit?
Both poor and fair personal credit scores are considered to be bad credit. A poor FICO credit score falls below 580 while a fair credit score can range from 580 to 669. A bad credit score can be the result of mismanaging financial obligations — for example, missing payments on existing loans or revolving credit lines, filing for bankruptcy or carrying balances on credit cards.
Lenders review your credit to determine whether you’re a risky investment. In general, lenders view bad credit as a sign that you might fail to repay your loan. Because of this, many business lenders look for good credit personal credit scores of at least 670. However, others are more flexible — sometimes accepting scores as low as 501.
Types of business loans for bad credit
While you typically need good credit to qualify for a business loan, there are some funding options that might still be available to you even if you have bad credit, such as:
- Business term loans: Private lenders offer both short- and long-term business loans, such as working capital loans and equipment financing. These can come with terms as short as a few months or as long as 10 years, depending on the lender. You’ll pay back a term loan in equal installments over a set period of time.
- Business lines of credit: With this type of financing, you can draw and repay funds on a revolving basis without having to reapply for funds. Business lines of credit also typically come with higher limits compared to business credit cards.
- Business credit cards: Similar to a line of credit, a business credit card gives you access to a revolving credit line that you can repeatedly draw on and pay off. Many also offer rewards on business spending. Note that some business expenses can’t be charged, though, such as payroll, inventory or leases.
- SBA loans: A loan backed by the Small Business Administration (SBA) is generally considered less risky for the lender. This is because the SBA will cover a portion of the debt if you default. Because of this reduced risk, the requirements to get approved for an SBA loan are often less stringent compared to traditional business loans. However, you’ll typically have to provide a down payment along with collateral to secure the loan.
Which is right for you? Learn about the types of business loans
Where to get a bad credit business loan
Several lenders offer business term loans and lines of credit to applicants with bad credit. Some options to consider include:
- Online private lenders: These lenders often provide a streamlined application process with more flexible requirements than traditional lenders. They also tend to fund their loans faster, which can be helpful if you need quick access to cash for your business.
- Your current bank or credit union: Traditional lenders often have stricter qualification requirements. However, your current bank or credit union might be willing to consider other factors — like your existing relationship with them, positive cash flow and savings — to help you qualify for business financing.
Keep in mind: While it isn’t a lender, the SBA backs a variety of business loans. While many lenders that provide SBA loans require a credit score of at least 620, others are willing to accept lower scores. You might also increase your approval chances if you have a well-established business or have bad credit due to extenuating circumstances.
How to get a business loan with bad credit
If you’re ready to apply for a business loan with bad credit, follow these steps:
1. Check your credit
When you apply for a business loan, the lender will review your credit to determine if you qualify — so it’s a good idea to check your credit beforehand to see where you stand. You can use a site like AnnualCreditReport.com to review your credit reports for free. You can also check your FICO credit score for free through Experian, a credit-monitoring service or possibly your bank or credit card company.
Additionally, several third-party companies allow you to review your business credit report. These include the credit bureaus Experian and Equifax as well as Dun & Bradstreet. If you find any errors, report them to the appropriate credit bureau to potentially boost your credit score.
2. Determine what kind of loan you need
Business loans are available for a wide array of purposes. For example, consider if you need working capital, money to help pay for necessary equipment or access to flexible funding for day-to-day expenses. By determining how you’ll use the funds, you can apply for the right type of business loan.
3. Compare lenders and choose your loan option
Make sure to shop around and compare your options from as many business lenders as possible. This can help you find the right loan for your needs. Consider interest rates (or factor rates, if applicable) as well as repayment terms and fees. Additionally, be sure to check each lender’s eligibility criteria, including minimum credit score, time in operation and annual revenue requirements.
After you’ve compared lenders, pick the loan option that best suits your needs.
4. Gather documentation and apply
When you apply, you’ll need to provide both personal and business information. For example, be prepared to submit business licenses, tax returns, financial statements, debt schedules (if any) and information regarding any collateral that will be used to secure the loan. Lenders might also ask to review a business plan or proposal to see how you plan to use the loan and your ability to repay it.
Once you’ve gathered your documentation, you’ll need to complete a full application. In many cases, this can be done fully online. However, some traditional lenders like banks and credit unions might require you to apply at a branch or over the phone. You might also need to discuss your options with one of the lender’s loan specialists to proceed.
5. Get your funds
If you’re approved, the lender will have you sign for the loan so the funds can be disbursed — often by direct deposit. Note that while traditional banks and credit unions can take weeks or months to process loan funds, online lenders tend to be a much faster option. Depending on the lender, you could get your funds as soon as the same or next business day after approval.
What interest rate can you get with bad credit?
In general, the lower your credit score, the higher your interest rate will be on a business loan. The types of rates you might qualify for vary depending on the type of loan you apply for. Here are the average rate ranges for a variety of loan types as of May 2024, according to Lendio:
- Business term loan: 8.49% to 36.00%.
- Business line of credit: 8.00% to 60.00%.
- Equipment financing: 7.50% to 24.00%.
- Invoice factoring: 3%+ (factoring fee).
- Business cash advance: 1.08+ (factor rate).
If you have bad credit, you can generally expect to qualify for a rate on the higher end of these ranges.
Comparing the best business loans for bad credit
Having poor or fair credit often means you’ll get a higher interest rate and possibly more fees. But exact rates and loan options differ by lender. So, it’s important to shop around and compare your choices with as many lenders as you can. Here are some important factors to keep in mind that can help you find the right loan for your business goals:
- Business loan requirements: A personal credit score is only one of the qualifying criteria. Lenders also want to see a minimum annual revenue of $100,000 or higher. Further, at least six months to two years of business history. Revenue and business age minimums differ among lenders and are pivotal factors for startups and low-revenue businesses.
- Loan options: Many lenders offer small business loans, business lines of credit or both. Deciding whether a lump sum or the ability to make multiple draws helps you choose the best lender. You may also be eligible for revenue-based financing that is less reliant on your credit score, as repayments are a percentage of future sales instead of a fixed repayment plan.
- Interest rates and fees: Comparing the loan’s annual percentage rate (APR) or factor rate (lenders might calculate interest costs differently) is essential as this factor calculates your total borrowing costs. Origination fees and prepayment penalties can also add to your expenses.
- Funding speeds: After final approval, anticipate receiving your loan amount via ACH transfer within one to three business days. Some lenders offer same-day funding, but you may have to accept the offer before a specific deadline.
Pros and cons of bad credit business loans
Pros
- Can help cover a variety of business expenses.
- Often have fast approval and funding speeds.
- Might help to build your business credit.
Cons
- Generally have higher rates and fees compared to good credit loans.
- Could have lower borrowing limits.
- Might have to provide collateral.
Credibly business loan
Alternatives to a bad credit business loan
These business loan alternatives can be easier to qualify for as they might not require a personal credit check. The repayment terms could also consume a smaller percentage of your daily cash flow. Unfortunately, these options are unlikely to build business credit.
- Business equipment loans: This type of financing lets you buy new equipment, with the machinery serving as collateral. Because there’s less risk for the lender, you might qualify for more favorable terms compared to an unsecured business loan.
- Crowdfunding: This option lets you raise funds from a wide audience, usually on social media or through a crowdfunding site like Kickstarter. There are a few types of crowdfunding to consider, such as a donation-based campaign through a platform like GoFundMe or a reward-based campaign where you offer exclusive perks or complimentary samples to your backers once the product idea goes to manufacturing.
- Invoice factoring: If you’re paid through invoices, you could sell your unpaid invoices to a factoring company and get up to 95% of the value of the invoices as an advance. The company will then collect payment directly from your clients, and you’ll receive the remaining balance minus any factoring fee.
- Merchant cash advance: With this option, a lender provides a lump-sum cash deposit that you repay with a percentage of your daily debit and credit card payments. There can be a maximum repayment term length, but there isn’t a minimum daily payment as term loans require.
- Payment processor business loans: Payments processor platforms — such as PayPal and Square — can advance a portion of future sales that you repay with each customer payment. This short-term loan alternative functions similarly to a merchant cash advance, yet usually with less rigorous revenue minimums. A notable difference is that only the sale activity through the payment processor determines your borrowing power.
- Personal loans: Another option could be a personal loan. Although most lenders require good to excellent credit, several others offer personal loans for bad credit. Plus, you don’t have to worry about meeting any business income or operating history qualifications. Just keep in mind that many lenders don’t allow their personal loans to be used for business purposes — so be sure to double-check what the restrictions are before applying.
Is a bad credit business loan right for you?
While poor personal credit impacts your borrowing power and potential rates, a bad credit business loan can still be worth it. For example, you might be able to borrow a higher amount compared to other alternatives as the lender will consider your business revenue and experience in addition to your credit. Plus, you might be able to build your business credit history, depending on the lender you work with and type of loan you choose.
Just remember that a bad credit business loan can have expensive rates and fees, and it might come with an aggressive repayment plan that can hinder your cash flow. If a typical business loan doesn’t fit into your budget, you might consider other alternatives with smaller funding amounts but lower rates to offset the cost of repayment.
Tip: Use our business loan calculator to see what your monthly payments could look like with different rates and terms.
Frequently asked questions (FAQs)
Yes, it might be possible to get a business loan with poor credit with some lenders. For example, with Credibly and Fora Financial, business owners could qualify for a business loan with a personal credit score of around 500.
There are many SBA loans to choose from, but the SBA Export Express loan typically has the most streamlined application process. The SBA reviews your application within 36 hours of receiving it and promptly provides a decision.
These loans also come with flexible terms and lower down payment requirements compared to other business loans.
There are many reasons a business owner might not qualify for a business loan. Here are some common reasons you could be turned down:
- You’ve got a poor credit history.
- Your business is in a high-risk or excluded industry.
- You have limited income or too much debt.
- You don’t have business collateral.
- You refuse to provide a personal guarantee.
- You’re applying for the wrong type of loan.
- You’re requesting too much money.
If you’ve been denied a business loan, you might have better luck with a business credit card, a business grant or a crowdfunding campaign.
There are no credit score requirements to start a business with an LLC structure, as you aren’t applying for a loan or revolving credit account. Instead, the LLC application process requires submitting paperwork to verify your business identity and ownership details and getting the proper licenses and permits. You’ll also need to apply for an employer identification number (EIN) and set up a business bank account to keep your personal expenses separate from those of your LLC.
Keep in mind that while having bad credit won’t prevent you from starting an LLC, it could make it hard to qualify for financing and put off potential investors. And if you’re trying to make on-time payments to lenders to improve your personal and business credit, you might end up with less working capital with a cut of your funds going to debt payments.
Generally, no — even lenders that work with startups usually want to see a positive cash flow to estimate your borrowing potential and ability to repay. However, there are some options that can be easier to qualify for even with limited funds, such as an SBA microloan or equipment financing that’s secured by what you purchase with the loan.
You could also consider a business credit card as card issuers often look at your personal income and credit score to determine eligibility.
Keep in mind that these types of financing often require decent credit and can come with higher APRs.
Some lenders may offer business loans that only require an EIN. However, this type of financing looks at your business credit instead of your personal credit — meaning you’ll need to build a strong business credit score before you can qualify.
How much you can borrow with a startup loan depends on the lender and type of loan as well as your personal credit and business strength. For example, startup business loans from online lenders can range from as little as $5,000 up to $1.5 million, while SBA microloans can go up to $50,000.
Josh Patoka contributed to the reporting of this story.
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