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Bad Credit Business Loans: These Are Your 5 Best Options

By Elise Moores Managing Editor at Fast Capital 360 Reviewed By Mike Lucas Updated on May 04, 2021

Wondering how to get a small business loan with bad credit? It’s quite possible.

We’ve been conditioned to believe a poor credit score is a deal-breaker when applying for small business loans. Lenders simply won’t approve you for business funding with bad credit.

However, you can get approved for bad credit business loans with terms that won’t leave you strapped for cash.

Thanks to the fast-expanding online lending industry, there are financing options for small business owners who have what credit bureaus define as “poor” credit scores.

We’ll help you find the best secured and unsecured business loans for bad credit.

5 Best Financing Options for Business Owners With Bad Credit

How Your Credit Score Impacts Loan Options

Although many other factors contribute to your business’s “fundability,” your business credit score has arguably the largest impact on what you qualify for. While it can be possible — however unlikely — to find lenders offering high-principal, long-term business loans for bad credit, a low score will usually restrict the options.

If you apply for a small business loan with bad credit and no collateral, you may find that your poor score keeps you from being approved for any funding at all.

A person works on a laptop as a gauge measuring a credit score hovers above in this concept photo.

What’s Considered a ‘Bad’ Credit Score?

Lenders usually consider 580 or lower a ‘bad’ credit score for business loan applicants. How do they determine this? Credit reporting agencies calculate and interpret your score based on your financial data and borrower behavior. Your credit score then falls under a  tier ranging from poor to excellent.  Lenders will judge how much risk they could assume if they extend a loan agreement. Based on that risk, lenders determine the maximum funding amount they’ll offer you, as well as your interest rate and repayment terms.

FICO categorizes applicants into 5 tiers based on credit score:

Credit ScoreRatingImpact
> 800ExcellentWhile lenders may deny an applicant for other reasons, those with “excellent” credit are rarely denied.
740 – 799Very GoodWith a credit score falling in this range, you’re more likely to be approved for a loan and may even have multiple options to compare.
670 – 739Good“Good” credit gives you a solid chance of being approved, but you probably won’t have the luxury of weighing your options.
580 – 669FairConsumers with “fair” credit may experience difficulty getting approved and may also experience higher interest rates and other costs.
< 580PoorAnyone applying for small business loans with a “poor” credit score is often rejected. These applicants might not qualify for several financing options, including unsecured business loans, with bad credit.

5 Best 'Bad Credit' Business Loans

If your score isn’t where you’d like it to be, that’s OK. There are still bad credit business loans and other financing options available for you, and we’ll explain how to apply for a business loan with bad credit.

You can obtain one of the best bad credit business loans available through alternative lenders.

Alternative lenders aren’t as risk-averse as banks. They extend capital to a broader selection of business owners, including those seeking business financing for bad credit. These firms generally focus more on your business’s overall financial health, so your credit score isn’t the end-all-be-all for their approval criteria.

Bad credit applicants with lower credit scores might find these financing options suitable.

Do you need a loan for your small business?

1. Short-Term Loans

As the name suggests, short-term loans for bad credit applicants are a condensed version of conventional term loans.

You’ll receive a lump sum of money to finance the project. You’ll pay off the principal, plus interest, according to a predetermined payment schedule over a repayment term.

The scheduled length is the difference: You’ll pay off short-term loans much more quickly than a conventional term loan, which can mature up to 30 years from signing. Generally, short-term loans reach maturity in 18 months or fewer, depending on the principal amount and your fundability.

The Case for Short-Term Loans

You can use these loans for nearly any business purpose, making them a flexible option without a long-term commitment, bad credit aside.

Alternative lenders offer short-term loans for businesses with bad credit because they have less risk tied to them. Simply put, there is less time for something to go wrong that causes you to default on the loan — and less money to lose even if you do.

Lending marketplaces such as Fast Capital 360 can help you track down online small business loans for bad credit.

Because they’re generally offered to riskier borrowers, there are some caveats with short-term loans. Rather than monthly payments, you might have to pay weekly or even daily.

Also, as with all business loans for poor credit borrowers, approval is not guaranteed. If you’re denied a short-term business loan because of your poor score, there are other business funding with bad credit options available.

2. Business Line of Credit

When approved for a business line of credit, applicants are given access to funds to spend as they need them.

  • You withdraw the exact amount of funds your business needs
  • You pay interest only against the capital you’ve taken out

You repay the money weekly or monthly until your line of credit reaches maturity. When you’ve repaid the initial amount, you’re free to take out more. Although some options require collateral to secure them, it’s possible to obtain an unsecured line of credit with a bad credit score.

These products, which are offered through Fast Capital 360’s funding partners, can be used for daily working capital needs, as well as larger projects.

Small Business Tip:

While business lines of credit are a great way to secure business funding with bad credit, they don’t always help you build your score. Some alternative lenders don’t report to credit bureaus, so they have no way of knowing if you’re in good standing on that debt. If you want to build your credit to open up more funding options, consider applying for a business credit card.

3. Accounts Receivable Financing

Accounts receivable financing, also known as invoice financing or invoice discounting, is an alternative funding product that converts outstanding invoices into immediate cash for your small business. It’s a  great option for receiving the working capital you need when you’re waiting for customer  payments.

Accounts receivable financing companies typically pay you in 2 installments:

  • First, you receive a business cash advance up to 90% of the total invoices you’d like to finance. Instead of paying you, your customers will pay your lender.
  • When the invoices are fully paid off, the remaining amount withheld from you will be paid out. You’ll be responsible for fees that accrue each week a balance remains. 

Trying to secure invoice financing with bad credit or no assets to serve as collateral isn’t as much of a hassle.  If you work with clients with excellent scores, accounts receivable financing  lenders can look past your credit challenges and get you the funding you need. The invoices secure the advance, making this form of financing self-collateralizing.

So if you’re wondering how to get a business loan with bad credit and no collateral, this may be the right option for you.

4. Equipment Financing

If your business needs to replace or add new equipment, financing for bad credit is available. These loans are typically secured through the equipment you’re purchasing. If you default, lenders can recoup their losses by seizing and selling the equipment.

You can secure up to 100% of the equipment’s value, though some lenders require a 10%-20% down payment.

Even with bad credit, equipment leasing and buying opportunities are still available because of the built-in collateral.

5. Merchant Cash Advance

A merchant cash advance (MCA) is a go-to financing option for business owners with bad credit. An MCA isn’t a loan but an advance on your future sales. Depending on the specifics of your MCA agreement, a lender will draw a percentage of your daily credit card sales as payment or withdraw funds directly from your business bank account. 

With this short-term bad credit business finance option, the creditworthiness of your business, while considered, is less important. What you need to get approved are solid sales.

A merchant cash advance is a  bad credit business finance option for borrowers turned down elsewhere.

Other ‘Bad Credit’ Business Loans

There are other ways to receive funding, though they come at a price. “Bullet” loans and other types of private financing provide very short-term, high-interest options.

With these “hard money” business loans, a bad credit score isn’t considered as much as other fundability factors, such as revenue and collateral.

Getting Business Funding with Bad Credit Through Fast Capital 360

If working with an alternative lender is the best path for you, here’s how to quickly apply online for business loans with bad credit or no collateral with Fast Capital 360. It takes 3 simple steps:

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Other Factors Lenders Consider

When alternative lenders review your application, they consider many factors to determine your fundability.  Credit scores are indeed weighted heavily in the business loan application process, but other parts of your business profile show your company’s full financial health.

Here are a few things that help lenders look past your score:

Annual Revenue

One of the most important parts of your loan application is your business’s annual revenue. High revenue proves to lenders that you bring in enough money to repay their loans.

When a business owner applies for a loan with bad credit, high revenues can help offset the risks.

Annual revenue also factors into the amount of money your lender will offer. In general, the higher the revenue, the higher the loan amount.


Even with high revenues, lenders want to know if your business is profitable.

While your business doesn’t have to be highly profitable to qualify for a loan, seeing that you have liquid assets to repay a loan will help your chances —  especially if you’re looking for business funding with bad credit.

Debt Obligations

If you have less than excellent credit and outstanding loans on the books, it might be more difficult to qualify for a second or third loan.

That’s because many lenders are hesitant to enter into what’s called a “second position” loan agreement. If you already have a business loan, your lender likely put a Uniform Commercial Code lien on your business.

This means that the first-position lender has the right to seize assets in the event of default, leaving less collateral (if any) for other lenders to recoup losses.

Cash Flow

A lender’s primary concern when offering bad credit business loans is if the borrower will make payments. Demonstrating that you keep enough money on hand to afford regular expenses goes a long way in helping you qualify for business financing, bad credit or not.

This is why lenders will commonly ask to see at least 6 months of business bank statements (or more), depending on the kind of financing you’re seeking.

How to Improve Your Credit Score

While you can obtain small business loans, even with bad credit, a low credit score still limits your overall funding options and raises interest rates. You can take the following steps to improve your credit score:

Pay on Time

Delinquent payments and collections have a significant impact on your credit score. Submitting payments on time is a must if you aim to improve your current standing.

Bolster Cash Flow

Lenders want assurances that you have enough cash in the bank to cover all of your debt obligations.

For this reason, it’s important to focus on increasing the balance of your bank accounts if your goal is a lower-cost loan with favorable terms.

Monitor Your Credit Score

If you’re working to rebuild your credit, periodically checking your credit score can help you monitor your progress.

Use your credit report to review your payment history and see what you still owe on individual accounts.

How’s Your Business Credit Score Calculated?

While the makers of the FICO® score and VantageScore® are tight-lipped about their specific calculations, we know what general criteria are taken into account and their impact:

Bad credit? Business loans are still available for savvy small company owners.

Payment History: Consistently meeting your minimum monthly payments on time is the most significant factor in your credit score. Even one missed payment can be a red flag when you apply to get small business loans with a poor credit score.

Amounts Owed: Commonly called your “utilization ratio,” this calculates what percentage of the total credit available to you is being used. Lenders want to see that you can take on debt without being underwater.

Account History: This is determined using the average age of your accounts and the last time they were used. Creditors like to see a long, positive history where you’ve been able to maintain several active accounts and continue to use them.

New Credit and Credit Mix: Opening multiple new and similar types of accounts at once will hurt your credit score because it’s viewed as risky behavior. However, successfully managing different types of credit — e.g., mortgage, auto loan and credit card — is a sign of financial responsibility.

Final Word: Getting a Business Loan With Bad Credit

Fast business loans with bad credit? They’re available — and you have options.

Whether you choose a short-term loan, business line of credit, invoice financing, equipment financing or a merchant cash advance, some lenders can help you get the capital your business requires.

If you’re still wondering how to get a small business loan or other financing with bad credit, we’ve got you covered. One of our expert business advisors can guide you through the funding process and help you grow your business.

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