Table of Contents

  • How Lenders View Your Credit Score
  • How Your Credit Score Impacts Loan Options
  • Why Businesses With Bad Credit Are Rejected by Lenders
  • 5 Best “Bad Credit” Business Loans Right Now
  • Applying For Financing Through Fast Capital 360
  • How to Qualify for More Affordable Loan Options

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We’ve been conditioned to believe that a poor credit score is an impossible obstacle to overcome when applying for small business loans. We’re told, like a home mortgage or an auto loan, lenders simply won’t approve you for business funding with bad credit.

Contrary to popular belief, you can get approved for bad credit business loans that some lenders offer with terms that won’t leave you strapped for cash.

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

If your small business has bad credit, here are your five best financing options:

How Lenders View Your Credit Score

Knowing exactly how your business credit score is calculated provides insight into the application process, giving you an edge when it’s time to pull the trigger on your financing options. 


Business loans without credit score requirements

($75,000 annual revenue required)


How’s Your Business Credit Score Calculated?

Your credit score is generated based on the info found in your credit report. 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 what their impact is:
How business credit scores are calculated

Payment History

The most significant factor, your payment history, is a record of whether you’ve made payments on time. 

If you consistently meet monthly payments and never go past due, you’ll see a positive impact on your score. Miss even one payment, however, and lenders start to see red flags when you apply to get a business loan with a poor credit score.

Amounts Owed

The “amounts owed” section is a bit more complicated. Simply put, it calculates what percentage of the total credit available to you is being used. This is commonly referred to as your “utilization ratio.”  

Generally, having less credit available will hurt your score. Lenders want to see that you can take on large amounts of debt but you aren’t underwater.

Account History

This part of your business credit score is determined using the average age of your accounts, as well as 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

The smallest categories are how often you’re opening new accounts and what type of accounts you’re opening. Opening multiple new accounts at once will hurt your credit score, because lenders view this as risky behavior. 

On the other hand, showing you can manage different types of credit — like a mortgage, auto loan and credit card — shows financial responsibility to potential lenders.

How Your Credit Score Impacts Loan Options

Although there are many other factors that contribute to your business’s fundability, your business credit score has arguably the largest effect 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.

Bad credit business loans

What’s Considered a “Bad” Credit Score?

In addition to understanding how credit scores are calculated, it’s important to know how lenders interpret them.

Based on these factors, your resulting score will fall under a category, or tier, from poor to excellent. When a creditor runs your credit, they’re looking at which tier your business is in. This helps lenders get a better idea of what “type” of applicant you are. In other words, it helps to judge what risk they assume if they decide to extend a loan agreement. Based on that risk, lenders determine the maximum they can offer you, as well as your interest rate and repayment terms.

FICO® categorizes applicants into five tiers based on credit score:

  • Excellent: > 800

    • While lenders may deny an applicant for other reasons, those with “excellent” credit are rarely denied.
  • Very Good: 740-799

    • With 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.
  • Good: 670-739

    • “Good” credit gives you a solid chance of being approved, but you probably won’t have the luxury of weighing your options.
  • Fair: 580-669

    • Consumers with “fair” credit may experience difficulty getting approved and may also experience higher interest rates and other costs.
  • Poor: < 580

    • A business with a “poor” credit score is often rejected when applying for a loan. Applicants in this range may not qualify for unsecured business loans and other preferred financing options.

Why Businesses With Bad Credit Are Rejected by Lenders

Credit scores are a measure of a company’s creditworthiness. If a lender looks at your credit report and determines that you’re too risky, they won’t offer you the funding you’re seeking.

If your payment history is filled with late payments or even a default, lenders won’t trust you to be able to consistently pay them back.

If your utilization ratio is too high, it shows you’re almost maxed out on what you already owe. Lenders don’t want to compete to recoup their losses with other financial institutions if something goes wrong and you go into bankruptcy.

Even if you do make your payments, the length of your credit history can affect your credit score. If you’re trying to start a business or finance a young one, your best option may be to obtain a secured business loan or business credit card.

Opening many new accounts will look equally risky to lenders. This type of behavior isn’t considered responsible, so it will negatively affect your chances of securing funding.

On the other hand, not having a good mix of credit accounts doesn’t give underwriters enough to judge your candidacy.

If your score isn’t where you’d like it to be, that’s okay. There are still bad credit business loans and other financing options available for you.

5 Best “Bad Credit” Business Loans Right Now

Applicants with an “excellent” score have access to almost any loan (within reason), while those with “poor” credit are considered high-risk by lenders. Still, even with bad credit, there are financing options available to you.

Even the Small Business Administration, whose SBA loan programs help owners like you receive funding when banks decline them, has minimum credit requirements along with other criteria.

Alternative lenders, however, are not as risk-averse as banks and the government. Instead, they’ll agree to extend capital to a broader selection of business owners, including those seeking business financing for bad credit.

These companies generally focus more on the overall financial health of your business, so your credit score isn’t the end-all-be-all for their approval criteria. 

Although alternative lenders do offer different long-term, unsecured business loans, bad credit applicants with lower credit scores may find these financing options more suitable.

1. Short-Term Loans

As the name suggests, short-term loans for bad credit applicants are a condensed version of a traditional term loan offered by a bank. 

Like a regular term loan or mortgage, you and your business will receive a lump sum of cash to finance the project you need funding for. You’ll pay off the principal, plus interest, according to a predetermined payment schedule over a repayment term agreed upon at signing. 

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

You can use these loans for almost any business purpose, making them a flexible option without a long-term commitment. If you have other loans with less affordable terms, they may offer the chance to be approved for a sort of business debt consolidation loan, 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.

Because they’re generally offered to riskier borrowers, there are some caveats. Rather than monthly payments, you may have to pay weekly or even daily. 

Also, as with all bad credit business loans, guaranteed approval for funding should never be taken for granted. If you’re denied a short-term business loan due to bad credit, there are other effective funding options available.

2. Business Line of Credit

Unlike short-term loans, this funding option isn’t set up like a traditional loan. Instead, when approved for a business line of credit, bad credit applicants are given access to funds to spend as they need them.

Receiving funds with these works a lot like a business credit card; you withdrawal the exact amount of funds your business needs, and only pay interest against the capital you’ve taken out.

Unlike credit cards, however, you pay the money back on a regular schedule. Instead of minimum monthly payments, you’ll pay either daily, weekly or monthly for up to 12 months. When you’ve repaid the initial amount, you’re free to take out more.

Unlike some options that require collateral to secure them, it’s possible to obtain an unsecured line of credit with a bad credit score. 

These funding products, offered by Fast Capital 360’s funding partners, can be used for daily working capital as well as larger projects. Their structure makes them perfect business loan alternatives if you have revolving capital needs. 

Small business tip: While business lines of credit are a great way to secure funding with bad credit, they don’t help you build your score. Alternative lenders don’t usually 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. They’re great options for receiving the working capital you need when waiting to be paid by your customers.

If you’re wondering how to get a business loan with bad credit and no collateral, this option takes care of both. By using the creditworthiness of your customers and using your incoming invoices as collateral, lenders mitigate a lot of the risk of lending to your business.

The financing company typically pays you in two installments:

  • First, they’ll give your business a cash advance of 80-90 percent of the total invoice(s) you’d like to finance. Instead of paying you, your customers will pay your lender.
  • When the invoice(s) are fully paid off, the remaining 10-20 percent that was withheld from you will be paid out. You’ll be responsible for fees that accrue every week that your customer does not pay.

Unlike other funding options, trying to secure invoice financing with bad credit isn’t as much of a hassle. That’s because instead of being based on your score, lenders look at the creditworthiness of the customers who will be paying them directly. This means that, if you work with clients with excellent scores, alternative lenders can look past your own credit challenges and get you the funding you need.

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 financing. This means your lender will care less about your credit score because, if you default, they’ll be able to recoup their losses by seizing and selling off the collateral.

You’re able to secure up to 100 percent of the value of the equipment being financed, though some lenders require a down payment between 10-20 percent.

This is a great option for any small business, but really helps certain industries. If you’re a restaurant owner, for instance, you know how risky lenders view the industry. This can make it difficult to apply for restaurant loans with bad credit. 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) isn’t a loan, but can similarly help you raise working capital. Like accounts receivable and equipment financing products, applying for a business cash advance with bad credit isn’t the end of the world because it secures itself.

When you enter into an agreement with an MCA lender, you receive a sum of cash in exchange for a percentage of your future sales, which ensures the lenders will be paid back.

Unlike other short-term funding options, the creditworthiness of your business holds less importance. What’s most important is having solid projected sales. Your potential sales are what’s considered when determining advance amounts and factor rates, which are used in MCAs instead of interest, to determine your cost of financing. 

With MCA factoring, company sales are taken from your merchant account through credit card or automated clearinghouse (ACH) payments until you reach a predetermined amount. Unlike interest — which can be decreased by paying off your principal early — you’ll still have to repay the entire agreed upon amount.

This funding product can be used for most general business purposes.

The fact that they use your sales to take payment makes them much easier to qualify for than traditional loans. As a result, a merchant cash advance for bad credit business funding may be your best option.

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 taken into consideration as much as other fundability factors, such as revenue and collateral.

Loans for businesses with bad credit

Applying For Financing Through Fast Capital 360

Sometimes companies that don’t have what it takes to get a traditional bank loan need money, and fast. Fortunately, we’ll show you how to quickly apply online for business loans with bad credit or no collateral with Fast Capital 360. It takes four simple steps: 

Fast Capital’s 4-Step Application

Step 1: Tell us about your business

  • Answer basic questions so we can connect you with the right lender.

Step 2: Tell us about you

  • Learning about you helps determine what you’re eligible for. No worries, this part won’t impact your credit score.

Step 3: Upload your financials

  • Taking a look at your revenue and other financial documents online enables us to quickly match you to funding opportunities.

Step 4: Get funded

  • You can be approved on the same day and, depending on your lender, get funding in 24-48 hours.


How much can my business qualify for?

($75,000 annual revenue required)


What Lenders Also Consider

When alternative lenders review your application for one of our best options, they consider many factors to determine your fundability. It’s true that credit scores are weighted heavily in the business loan application process, but other parts of your business profile show the full financial health of your company. 

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

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 may help offset the risks tied to it. 

Annual revenue also factors into the maximum loan size you qualify for. Generally speaking, the higher the revenue, the higher the loan amount you can get.  


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, it’ll help your chances, especially if you’re looking for business funding with bad credit.

Debt Obligations

Sometimes businesses take out loans when they already have others on the books. If you have less than excellent credit, you might have a more difficult time qualifying 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, it’s very likely that your lender put a UCC lien on your business. 

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

Cash Flow

A lender’s main concern when offering a bad credit business loan is if you’ll be able to make your 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 three months of business bank statements (or more) depending on the kind of financing you’re looking for.


Find the best business loan rates of 2019

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How to Qualify for More Affordable Loan Options

Since bad credit still limits your overall funding options and raises interest rates, you can take these steps to improve your credit score and graduate to more affordable loans.

Here’s a quick list of what you can put into practice today to work towards an “excellent” credit designation and increased fundability:

Pay on Time

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

A history of on-time payments builds a relationship with the lenders associated with these accounts. As a result, they might be willing to negotiate better terms or extend additional capital in the future. 

Boost Cash Flow

Cash flow is essential. 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, checking your credit score periodically can help you monitor your progress. 

Use your credit report to review your payment history and see what you still owe on individual accounts. This helps you to plan accordingly and set more realistic goals.


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A Final Word on Funding a Business With Bad Credit

If you have bad credit, business loans with affordable terms are still available. Whether you choose a short-term loan, business line of credit, invoice financing, equipment financing or a merchant cash advance, there are lenders that can help you get the capital your business requires.

If you’re still wondering how to get money for your business 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.


Learn how easy it can be to get affordable funding for your business.

How much can my business qualify for?

Estimate My Terms

Apply to multiple lenders with just one application.

Learn More