Can You Get a Business Loan with Bad Credit?

Written by Banks Editorial Team
4 min. read
Written by Banks Editorial Team
4 min. read

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Getting a business loan to finance your startup or existing business can be difficult if you have bad credit. However, just because you may not easily get approved for a loan doesn’t mean your business operations should come to a halt. Various financing options, such as bad credit business loans, make financing more accessible to less creditworthy borrowers. 

Keep reading to understand whether you can get a business loan with bad credit, the tips to get one, and the available financing options.

Find The Best Loan For Your Small Business

Get funding in as little as 24 hours. See your prequalified offers by filling out a quick online form. No industry excluded. SBA financing is available.

What Do Lenders Typically Consider as Bad Credit?

What is considered bad credit by one lender may be good to another one. If you’ve made poor financial decisions in the past or missed your bills for reasons beyond your control, you probably know how hard it can be to get approved for a small business loan.

So, what exactly do lenders consider bad credit? Anything that could put you in the category of high-risk borrowers is bad credit. It can be anything from low credit scores to no credit history or bankruptcy, which can limit your business financing options. 

Can You Still Get a Business Loan Even with Bad Credit?

Yes, it’s possible to get a business loan even with a bad credit score. Some business lenders don’t have minimum credit score requirements. Instead, they focus more on the business’s financial stability and length of operation. 

However, you can expect to pay higher interest rates because you’re considered a high-risk borrower. In addition, small business lenders may require you to provide collateral to back up the loan. 

Tips for Getting a Business Loan with Bad Credit

While it’s possible to get a business loan with poor credit, other business lenders don’t accept applicants with credit scores below 500. So before you begin your loan application process, here are some tips that will help boost your approval odds.

Determine How Much You Need and What You Can Borrow

You first need to calculate the amount you require and how much you can borrow based on your credit score, time in business, and annual revenue. It’s important to note that the size of the loan may impact the interest rate you’ll get, repayment period, and other additional charges. 

If you have a low credit score, you’ll get higher rates, so it’s wise to keep this in mind when deciding how much to borrow. Taking on a loan, if you can’t manage to repay, can hurt your credit score further. Choosing longer repayment terms may lower your monthly payments, but you may end up paying more in interest. 

Prepare all the Needed Documents Beforehand

Lenders typically ask for various paperwork when evaluating your eligibility for a loan. Some of these documents include:

  • A comprehensive business plan
  • Personal and/or business bank statements
  • Personal and/or business tax returns
  • Business and/or personal credit score
  • Profit and loss statements
  • Balance sheets
  • Business registration and license
  • Employer Identification Number (EIN)

The exact documentation you’ll need varies based on the lender. However, they may help you secure a business loan if you have bad personal credit. In addition, gathering your paperwork beforehand will speed up the loan application and approval process.

Provide Collateral If You Can

Providing your business assets to back up the loan can improve your chances of approval. In the worst-case scenario, the lender will seize and recoup the collateral, lowering their lending risk.

Acceptable forms of assets generally differ based on the lender, but they can include inventory, equipment, or commercial property. Accounts receivable, unpaid invoices, and other future earnings may also act as collateral. Keep an eye on business loans that require personal assets as collateral because you risk losing your home or car.

Find The Best Loan For Your Small Business

Get funding in as little as 24 hours. See your prequalified offers by filling out a quick online form. No industry excluded. SBA financing is available.

Carefully Review Your Loan Agreement

When applying for a business loan, your lender will offer you a loan agreement that contains complete information on the terms and conditions you agree to. Make sure you carefully review your loan agreement to avoid surprise expenses down the road.

Some of the things to review include:

  • Your loan amount and what you can expect to repay
  • The interest rate
  • Repayment terms
  • Prepayment penalties, late payment fees, and other costs.
  • Whether a personal or business collateral is required

Of Course, Improve Your Credit

While you can get a business loan with bad credit, not all lenders work with borrowers with credit scores below 580. To increase your approval odds and get better terms and rates, you can improve your credit score by:

  • Paying bills on time
  • Paying off debt
  • Don’t forget to monitor your business credit
  • Keep track of your credit report
  • Acquire a business credit card

What are Your Financing Options When You Have Bad Credit?

There are various loan options for borrowers with bad credit. Some don’t even have minimum personal credit score requirements. Here are some options to consider if you have a poor credit history.

SBA Loans

The U.S. Small Business Administration offers a wide range of loan programs to small business owners who may otherwise not qualify for traditional business loans due to poor credit. For example, CDC/504 Loan Program offers up to $5 million in financing.


These are loans offered by microlenders, typically non-profit organizations that help underserved business owners access capital. Microloans are often small in size, and the average microloan is around $13,000 and may go up to $50,000. There are several microlenders across the U.S., so make sure you shop around for the best deals.


Crowdfunding is a way to raise money for your business using a platform. There are various crowdfunding platforms to choose from; some are even designed exclusively for business owners with bad credit. Other platforms like Kickstarter provide tangible rewards, while others offer equity or investment in exchange for the funding.

Line of Credit

Business lines of credit are similar to personal lines of credit, where you can draw funds on a needed basis. But with a business line of credit, you can access funds up to a certain limit. Then, once you pay back the drawn amount in full, you can borrow again.

Business Cash Advances

A business cash advance or a merchant cash advance is a financing solution that looks at past sales or revenue to determine how much advance a business can get. Business owners receive funds in a lump sum, and payments are made using future sales, typically on a daily or weekly basis.

Term Loans

A term loan is a flexible financing option that gives you access to a lump sum amount of money repayable within a set period of time. While many lenders require a good credit score to qualify for a term loan, online lenders like Biz2Credit can work with borrowers with bad credit. Loan amounts range from $25,000 to $500,000, paid back in up to 36 months. Submit an online form to request funding approval in as little as 24 hours.

Invoice Factoring

If you have unpaid customer invoices, you can sell them at a discount to secure business financing called invoice factoring. Usually, the invoice factoring company is more interested in the unpaid invoices than your personal or business credit scores.

Business Credit Cards

If you have bad credit and need quick access to cash, a business credit card might be a better option. Most credit issuers will check your personal credit score before approving your application for a business credit card. If your score is below the required minimum, you may need to get a secured business credit card.


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