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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

Wondering how to get a small business loan with bad credit? It’s not as challenging as you might think. 

We’ve been conditioned to believe a low credit score is a deal-breaker when applying for small business loans and that bad credit lenders don’t exist. 

In fact, roughly 90% of the reasons given by firms that didn’t think they’d be approved for financing were credit-specific, according to the Federal Reserve Banks’ Small Business Credit Survey. They included the following: 

  • Too much debt: 36%
  • Low credit score: 33%
  • Too new or insufficient credit history: 23%

While no lender will provide guaranteed approvals of loans for poor credit, many lenders are willing to work with subprime applicants. Additionally, you could get approved for a bad credit business loan 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.


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How Your Credit Score Impacts Loan Options

Although many factors contribute to your business’s fundability, your business credit score has one of the most significant impacts. 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. Indeed, insufficient collateral was another reason why 41% of discouraged business owners did not apply for financing, according to the Federal Reserve Banks’ report.

Related: Unsecured Small Business Loans

Moving image of speedometer graphic with the FICO credit score rating range, including scores from poor to fair to good to very good to excellent

What’s Considered a ‘Bad’ Credit Score?

Lenders usually consider a score below 580 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 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.

Credit scoring company Fair Isaac Corporation, more commonly referred to as FICO, categorizes applicants into 5 tiers based on credit score:

Credit Score Rating Impact
> 800 Excellent While lenders may deny an applicant for other reasons, those with “excellent” credit are rarely turned down.
740 – 799 Very Good 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.
670 – 739 Good “Good” credit gives you a solid chance of being approved, but you might not have the luxury of weighing different options.
580 – 669 Fair Consumers with “fair” credit may experience difficulty getting approved and incur higher interest rates and other costs.
< 580 Poor Anyone applying for small business loans with a “poor” credit score is often rejected for various financing options.

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.

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

1. Short-Term Loans

As the name suggests, short-term loans are a condensed version of term loans (and they’re one of the best ways to get a loan with bad credit).

If approved, the lender will give you a sum of money. You’ll pay off the principal, plus interest, according to a predetermined payment schedule over a set repayment term.

You’ll pay off short-term loans much more quickly than a conventional term loan. 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 a lower risk profile. Simply put, there is less time for something to go wrong that could cause you to default on the loan — and less money to lose even if you do.

Because of the higher risk, there are some caveats with short-term loans. For instance, 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. Accounts Receivable Financing

Accounts receivable financing 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 waiting for customer payments.

Accounts receivable financing companies typically pay as follows: 

  • You receive a business cash advance, which may be up to 90% of the total invoices you’d like to finance. 
  • You’ll be responsible for fees that accrue each week a balance remains. However, the remaining amount withheld from you will be paid out when the invoices are fully paid off. 

If you work with clients with excellent credit scores, accounts receivable financing lenders can look past your credit challenges and get 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 other than your invoices, this may be the right option for you.

Do you need a loan for your small business?

3. Equipment Financing

If your business needs to replace or add new equipment or machinery, you might consider lenders offering equipment loans for bad credit. 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.

In some cases, you could secure up to 100% of the equipment’s value, though lenders often require up to a 20% down payment.

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

4. Merchant Cash Advance

If you’re looking to get approved for a loan with bad credit, a merchant cash advance (MCA) is another alternative financing option to consider. 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 of an approval factor. Instead, lending providers are more interested in seeing solid sales.

A merchant cash advance is one of the best bad credit business finance options for borrowers turned down elsewhere.

5. Business Line of Credit

A business line of credit is the most flexible funding solution, and it’s a top option when you’re in search of the best small business loans for bad credit. 

Borrowers are approved for a maximum amount from which they can draw funds as needed. Interest accrues only against the capital you’ve taken out. 

You typically repay the money weekly or monthly until your line of credit reaches maturity. When you’ve repaid the initial amount, you’re often 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. Fast Capital 360’s lending partners, for example, will accept as low as a 560 credit score. 

Business lines of credit can be used for daily working capital needs and 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. The same goes for other alternative funding options, such as merchant cash advances and some short-term loans. That’s because some alternative lenders don’t report to credit bureaus. 

    If you want to build your credit, consider applying for a business credit card. On the flip side, when a new funding offer isn’t reported to the credit bureaus, that means it’s not showing on your credit profile as additional debt.

Where Can You Get a 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. 

Interestingly, instead of banks and credit unions, 20% of firms in 2020 applied for loans, lines of credit and cash advances via online lenders, according to those surveyed in the Federal Reserve Banks’ report. Another 15% applied with finance companies. 

Because alternative lenders generally focus more on your business’s overall financial health, your credit score isn’t the end-all-be-all for their approval criteria.

Here are a few top lenders offering bad credit business loans and financing.

Forward Financing

Forward Financing offers revenue-based financing to small business owners with a minimum of a 500 credit score. To qualify, applicants need at least 1 year in business and at least $10,000 in monthly revenue. Funding amounts range from $5,000-$300,000.

Forward Financing has a 4.8-star Google rating. It’s also accredited with the BBB with an A+ designation and a 4.55-star rating from customer reviews.


Credibly offers merchant cash advances to applicants with at least 6 months in business and a credit score of at least 500. The business must have at least $15,000 in average monthly bank deposits to qualify. Advance amounts go as high as $400,000. Additionally, Credibly offers business lines of credit to applicants with at least a 560 credit score and $50,000 in annual revenue. Equipment and accounts receivable financing are also available. 

Credibly is accredited with the BBB and is A+ rated. The company also has a 4.8-star rating on Trustpilot.

The Business Backer

This lender offers small business financing to applicants with at least a 550 credit score who have at least 1 year in business and earn a minimum of $100,000 in annual revenue. Funding options include loans, lines of credit and purchases of receivables. The Business Backer has a 4.6-star rating on Trustpilot and Facebook as well as an A+ rating with the BBB.

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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.

Get Funding in 3 Easy Steps

  • Get Preapproved Have lenders compete for your business to get the lowest rate.
  • Review Your Options Receive offers from multiple lenders with one application.
  • Get Funded Knowledgeable advisors will help you choose the best loan option.

Bad credit? No problem. Find financing options.

Get Started

Other Factors Lenders Consider

When alternative lenders review your application, they consider many factors to determine your fundability, particularly when it comes to the best business loans for bad credit. While credit scores are typically weighted heavily in the business loan application process, other parts of your business profile also show your company’s 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 generate enough money to repay their loans.

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

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


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

While your business doesn’t have to be 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 challenging to qualify for a second or third loan.

That’s because many lenders are hesitant to enter into a “second position” loan agreement. If you already have a business loan, your lender will 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

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.

At the end of the day, lenders want assurances you have enough cash in the bank to cover all of your debt obligations.

This is why they will commonly ask to see 4-6 months of the most recent business bank statements, depending on the kind of financing you’re seeking.

Needless to say, it’s essential to focus on increasing the balance of your bank accounts if your goal is a lower-cost loan with favorable terms.

How Your Business Credit Score Is Calculated (And How to Improve Yours)

Here’s a breakdown of how FICO scores are calculated.

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

Payment History

Consistently meeting your minimum 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.

Because 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.

Amounts Owed

Commonly called your “utilization ratio,” amounts owed reflect what percentage of the total credit available to you is used. Lenders want to see that you can take on debt without being underwater. 

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

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.

New Credit and Credit Mix

Opening multiple new and similar types of accounts at once can 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.

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

Related Reading

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