Sections of this topic
Keeping a business open these days is liable to leave you with both a need for extra funds and less than stellar credit. Unfortunately, it’s a truism that banks only lend to people who are already pretty financially healthy. The good news is that there are many options for bad credit business loans out there, including a variety of online and alternative lenders.
Quick View
- Biz2Credit – Best Overall
- FundBox – Best for Growing Businesses
- OnDeck – Best for Quick Cash
- Credibly – Best for Flexible Loan Amounts
- Fora Financial – Best for Short Term Loans
- US SBA Loans – Best for Long Term Loans
Lender
Interest Rates
Pre-pay penalties
Term Length
Loan Fees
Application Process
Starting at 7.99%
None
12 to 36 months
Variable fees
Create online profile, funding within 48 hours
8.33%
None
24 or 52 weeks
No application or origination fee
Soft credit pull, receive money in days
Starting at 35%
None
Up to 24 months
Origination fee, late payment fee, returned payment fee, monthly maintenance fees
Apply online for same day decision
Factor rate: 1.15
APR: 9.99%
No info
6 to 18 months
2.5% origination fee and more
Meet requirements, apply online, receive funds same day
Factor rates: 1.10
Early pay-off discounts
4 to 15 months
2.5% origination fee
Apply online and receive funding in 72 hours
Pegged to prime rate
Up to 5% of prepayment
Long term
Varies
Find a local lender, can take months
Quick Verdict
Best Overall – Biz2Credit. While they don’t necessarily specialize in bad credit borrowers, they can find terms to meet most needs.
The Best Bad Credit Business Loans
Find out more about the best business loans for bad credit available. We found the easiest, most convenient business financing options you can apply for online. With a range of term lengths, interest rates, and more, you’ll be able to find the financing option to match your needs.
Biz2Credit
4.6
Biz2Credit asks a lot from their customers, including a higher minimum credit score for a business loan. Small business owners may find it easier to get a working capital loan, which is paid back according to the business’s receipts.
Note that terms start at one year, while other lenders on this list usually offer shorter-term loans. It may be a little harder to qualify for Biz2Credit, but the benefits are better rates and longer terms.
Application process:
- Create profile
- Submit application, including bank statements
- Decision within 24 hours
- Funding within 48 hours
- Working capital and term business loans
- Longer term loans
- Weekly or biweekly payments
- Requires 660 personal credit score, $250k annual revenue
FundBox
4.2
Fundbox offers several different financing options, including term business loans and business lines of credit. The service requires you to link accounting software and other information to assess your business. This means they aren’t relying solely on a personal or business credit score, so there’s no minimum credit score requirement to meet and a poor credit score won’t interrupt your cash flow.
While Fundbox has a lot to offer, there are a couple of things to be aware of. First, their term loans are still in “beta,” a term borrowed from software developers for something that’s not 100% ready.
Also, be aware that Fundbox’s auto-payment always withdraws on Wednesdays. Even if you pay off the loan early, you’ll still have to wait for the next Wednesday payment to roll around. Fundbox assesses your business’s health, rather than credit score, when deciding to extend a small business loan.
Application process:
- Connect accounting software and checking account to assess business health
- Soft credit pull
- Select terms
- Receive money in days
- Quick approval
- May be able to get a second loan without reapplying
- Auto-payments available
- Term loans in beta
OnDeck
3.6
OnDeck doesn’t specialize in offering a small business loan with bad credit. There’s also a minimum personal credit rating you’ll need, so a bad credit score may put this option out of reach. However, a term loan with OnDeck offers one big advantage for business loans.
If you need cash flow quickly, OnDeck provides funds as soon as the same day you apply. While the interest rate and fees may make your eyes pop, there may be circumstances when fast financing is worth it. Additionally, the business loan agreement includes a number of benefits, including opportunities to wipe out interest and save some money.
Application process:
- Apply online
- Requires bank statements, annual revenue
- Receive same-day decision and funds
- Prepay and remaining interest waived
- Loyalty program – take out a new loan and existing interest waived
- Consistent payment amounts
- Personal credit score, annual revenue, and other loan requirements
Credibly
3.5
You can have a fairly low credit score and still be eligible for business loans with Credibly. Poor credit history may impact the interest rates that are offered to you, however. While you may be able to get a business loan with bad credit, Credibly may not be a great option for startup business loans. Your business needs at least a few months of revenue history to qualify.
Application process:
- Provide bank statements, cash flow, and credit information–min. personal score 500
- Receive funding same day
- Several business financing options
- Quick turnaround times
- Quick Draw funding allows additional loans
- Requires at least 6 months in business
Fora Financial
3.2
With terms as short as 4 months, Fora Financial is a great option if you need some additional funds, but only for a little while. Early pay-off discounts make Fora an even more attractive choice for short-term financing.
Business lenders typically take bad personal credit into account. However, Fora has a minimum credit score of 500, which is fairly deep in “bad” territory. As a result, if your business can meet requirements in sales and a few other areas, you may be able to get a business loan matched to your needs. Secured loans and other options for bad credit are also available.
SBA loans can help those with a poor personal credit score get long-term financing.
Application process:
- One-page application
- Provide 3 months of bank statements
- Funding in as little as 72 hours
- Tailored amounts and terms
- Unsecured and secured business loans are available
- Open to applications 24 hours
- Requires 6 months of operation, $12,000 in monthly sales, and no bankruptcies
US SBA Loan
3.0
One requirement for SBA loans is that every other business financing option has been denied, so in some ways, it’s the last resort option for small business loans. The SBA arranges and guarantees the loans, giving traditional banks additional confidence in businesses looking for money. Some requirements, like minimum credit score and the length of the term loan, depending on the specific lender.
Interest rates are limited, usually pegged to the prime rate. There are also a range of other protections for borrowers required by the SBA. SBA loans can help those with a poor personal credit score get long-term financing.
Application process:
- Find a local lender working with Small Business Administration
- Gather business documents
- Can take months
- Loan partly guaranteed by SBA
- SBA matches you to interested lenders
- Fixed and variable rate loans
- Through traditional bank
- Can take several months
Choosing the Best Bad Credit Business Loan
You may need to get a business loan to keep your doors open and make enough to pay your debts. Unfortunately, bad credit scores can make getting a small business loan from a traditional bank very difficult, dooming businesses that might have built back to great success.
Luckily, there are now other options where businesses can get a term loan, merchant advance or other types of financing. These alternative lenders take other factors into account, offer shorter terms, and provide other options that can keep your business operating despite bad credit history.
Interest Rate and APR
Many alternative and online lenders will offer a range of loan options, which allows a business owner to select financing options that best fit their needs. An important factor in that decision is the interest rates on offer, which will determine the bulk of the loan’s overall cost.
Most lenders consider a credit score when determining the rates they offer, including both personal and business credit scores. Small business loans for bad credit scores usually come with a higher rate to compensate for the perceived higher risk. You can expect the loan to end up costing more overall as a result.
Note that interest rate and annual percentage rate (APR) aren’t the same things, as APR includes some fees. Additionally, some options may not ask you to pay interest, for example, you may be able to find a business line of credit that only charges fees.
Term Length and Penalties
Most loan options will come with a term length, penalties for non-payment, and a range of other terms. Obviously, it’s important to review them thoroughly as they determine how and when repayment is due, as well as what happens if the loan isn’t repaid.
Term loans are one particular type of small business loan, one that you’ll commonly find offered by online lenders and which matches most people’s idea of “how a loan works.” A term loan can be particularly difficult to get with bad credit, however. There are other options, like merchant lines of credit or invoice factoring, that might be easier to obtain. We delve into those options more below.
Loan Purpose
The reason you’re seeking a business loan may actually impact your approval odds. When small businesses are seeking money to expand or grow, approval may be more likely even with a less than perfect credit score.
Additionally, loans for things like buying new equipment may be easier to get with a poor credit score, as the piece of equipment itself can act as collateral for the loan. The minimum credit score required for different types of financing can also vary, so you may be able to find a lender even with poor personal credit scores.
Loan Requirements
Before paperwork is examined or your business plan reviewed, there are some minimum requirements that may have to be met for loan approval. The requirements can include a specific credit score, though others regarding a business’s health can’t be found on a credit report.
A business loan offered for small businesses might require an open business bank account, a minimum business cash flow, and at least a few months of operation. Some loans might require a personal guarantee from the owner, particularly if the business has bad credit.
Additionally, some financing options may have specific requirements, like a down payment for buying new equipment or assessing outstanding accounts for invoice financing.
Alternatives
The financing option most people are familiar with are personal loans structured as a term loan, with interest on the principal being repaid over a specified timeline. Whether it’s an unsecured or secured loan, these loan options can be particularly difficult to obtain with a poor credit score. Small business owners have a wider range of options available to them, however:
- Equipment financing: Similar to a car loan, the new equipment being purchased acts as collateral for the loan.
- Invoice financing: Money is borrowed against unpaid customer invoices, allowing you to access some of that money immediately. Invoice factoring is a similar option.
- Merchant cash advance: Merchant cash advances involve borrowing money in return for a share of future profits from credit card sales, something that should perhaps be done cautiously.
- Working capital loans: Short-term loans used to fund day-to-day operations.
- Business credit cards: A business credit card functions more or less the same as a personal one. Can be difficult to obtain with bad credit.
- Business credit line: Business lines of credit are somewhat similar to credit cards, in which you have a running balance you can pay down, with an overall credit limit. The difference is you can borrow and pay back cash, rather than being limited to a card.
In addition to different types of loans, there are other things you can do to improve your odds of getting bad credit business loans. Some online lenders have more generous requirements. Another option may be to sign a personal guarantee, making you personally liable for the loan.
Frequently Asked Questions (FAQs) for Bad Credit Business Loans
Final Thoughts on Bad Credit Business Loans
It’s not impossible to get a business loan with bad credit. However, you may need to do some homework and find the option that best meets your needs and budget. With the mix of traditional and innovative lenders available today, there are options to meet almost every need.
Rory is a content creator living in a small town in New England. She specializes in human resources and project management. Currently, she’s working on her first book about the importance of providing high-quality benefits for employees. Rory spends most of her free time hiking with her dogs or gardening in her back yard.
