Small Business Loans for Bad Credit

start up business loans with bad credit

Sometimes, when you’re ready to grow your business, bad credit can hold you back. Many lenders consider a small business owner’s credit. If you’ve had some credit trouble in the recent past, you may find it difficult to qualify for business loans in the present –– even if business is booming!

Fortunately, there are many business loans for bad credit, though they may have high interest rates and strict repayment terms. In this article, we’ll break down the pros and cons of business loans, how to get a business loan with poor credit, and what you can do if you don’t qualify for a business loan.

Can You Get a Business Loan with Bad Credit?

The good news is, yes, there are several ways to get a business loan if you have a low personal credit score. Many business lenders specialize in new businesses or business owners with poor credit. 

While the best options, like cash-back business credit cards with flexible repayment terms and low interest rates, are only available to businesses with solid credit, many offers are built specifically for new and struggling businesses. These loans help companies to establish healthy credit history and make it easier to secure funding in the future.

What is a Bad Credit Score for Business?

Different credit scores represent different levels of risk for business lenders. Like most business credit cards, some funding options are primarily available to business owners with good credit. Others, like term loans, secured loans, and some lines of credit, have significantly lower credit score requirements. 

As a general rule, higher loan amounts –– and more flexible repayment terms –– are only available to business owners with good credit. It’s still possible to secure a loan for bad credit, though, as long as you have current cash flow, a strong business plan, and a good growth outlook.

  • Excellent (720-850) –– An excellent credit score makes it easy to secure large loans at low interest rates.
  • Good (670-719) –– A good credit score makes it possible to secure many types of loans unavailable to business owners with lower credit scores.
  • Fair (620-669) –– A fair credit score makes it challenging, but not impossible, to secure many low interest rates, flexible repayment terms, and business credit cards.
  • Poor (500-619) –– A poor credit score makes it tough to qualify for loans that aren’t specifically meant for business owners with poor credit.
  • Very Poor (Below 500) –– A very poor credit score will severely limit options for funding and may require business owners to spend time improving their credit score before applying.

Common Types of Small Business Loans and Funding

Luckily for business owners, there are many modern options for small business funding –– even for business owners with poor credit! Some methods are widely accessible, some are swift, and some are only available to businesses with solid credit and a healthy reputation.

SBA Loan

The Small Business Administration provides several flexible funding options for businesses with poor credit depending on a number of qualifying factors.

Equipment Loan

An equipment loan is a specialized type of loan meant specifically for investment in business equipment. Equipment loans are often unsecured and feature short repayment terms.

Business Line of Credit

A business line of credit is a flexible extension of credit similar to a personal line of credit. A business line of credit is typically an unsecured loan with a variable interest rate.

Secured Loans

A secured loan is a type of loan meant to help businesses build credit. Since a secured loan is backed by a security deposit, it usually isn’t a good solution for a business that needs cash fast.

Merchant Cash Advance

A Merchant Cash Advance is a type of short-term business loan based on projections of future credit card sales. Merchant Cash Advance loans are usually unsecured loans that feature high interest rates and no set repayment terms.

Invoice Factoring and Invoice Financing

This high-risk option is tailored to businesses with high revenue but poor credit. This strategy allows businesses to sell outstanding invoices in exchange for cash –– it can go wrong quickly, though, if clients refuse to pay, so proceed with caution.

Business Credit Cards

Business credit cards are special credit cards built specifically for businesses. They offer fast access to cash but typically come with high interest and strict repayment terms. The best business credit cards are primarily available to businesses with good or better credit scores. 

How to Get a Bad Credit Business Loan

When it comes to small business loans, bad credit can make things difficult. Business owners must demonstrate that their business is healthy and on a solid trajectory of growth to access the best options. Since investing in a company with little credit –– or bad credit –– is a considerable risk for business lenders, they will want to know that the company has a detailed business plan, an effective team, and a competent leader.

As long as you have a good team and a tight business plan, the steps to get a business loan are simple:

Evaluate Your Needs

One of the first questions a lender will likely ask is, “Why do you want this loan?” It’s best to know the answer to that question well in advance.

  • Are you planning to launch a new marketing campaign (social media ads, direct mail, etc) with the loan funding?
  • Are you expanding your team and using the loan to fund early payroll?
  • Are you investing in infrastructure by purchasing new equipment or software?
  • Are you launching a new product and securing the loan to purchase materials?
  • Are you financing a real estate upgrade to allow for future growth?

It’s also worthwhile to evaluate whether you truly need a loan to fund your expansion, or if you can raise funds in a different way, perhaps by investing profits slowly over a longer period of time, waiting for a better opportunity, or turning to another resource like crowdfunding. Another option is revenue-based business financing.

Do Your Research and Compare Your Options

Once you know why you need your loan and how you intend to use it, it’s time to research what’s available. The best business loans typically come from banks and credit unions, but institutional lenders typically have high credit score requirements. 

Many business owners find it easier to qualify for bad credit business loans by exploring options with online lenders. Often, online lenders will offer short-term or secured loans tailored to business owners with a low personal credit score. These poor credit loans will usually have easier terms but higher interest rates.

Check Your Eligibility

After making a shortlist of options, closely examine the requirements of each to make sure that your business is currently eligible. 

  • Check to see if the lender will evaluate your personal credit score, your business credit score, or both. Some loans have credit minimums –– and some even have credit maximums!
  • Instead of credit score, some lenders evaluate businesses by annual revenue. If you have several strong years of sales history, you’re more likely to qualify.
  • Most lenders will examine your cash flow per quarter or month, to see how much money moves in and out of your business during a given time period.
  • Some lenders require at least one year –– or even several years –– of business history.
  • Most lenders will want to know if you’re currently balancing other debt. The more debt you’re currently carrying, the harder it will be to add to it.
  • Some lenders have restrictions on how they allow their loans to be used and are more likely to issue loans for certain purposes than others.

Gather All Necessary Documents

To comply with legal requirements, business lenders will typically request documents to prove identity, business ownership, and proof of cash flow, annual revenue, debt load, and more. This usually requires tax returns, accounting reports, and bank statements evidencing cash flow

Additionally, lenders will usually require a detailed business plan that includes the following:

  • A comprehensive description of the product or service that you provide to customers, along with cost analysis, competitor research, pricing data
  • A marketing strategy that identifies a specific consumer profile along with a plan to reach and convert consumers in a market shared by competitors
  • A description of your organizational hierarchy that explains how teams and management are structured and evaluated
  • A detailed explanation of how money the business generates revenue, including expense predictions and revenue projections for at least one year


After you’ve evaluated your funding needs, researched your options, and assembled all necessary documents, it’s time to apply to your shortlist of lenders. To simplify administration –– and reduce the number of hard pulls on your credit report –– it’s best to apply to one loan at a time, according to your preference. 

When is the Best Time to Apply for a Business Loan?

When you’re ready to take bold action to grow your business, but your growth is outpacing your revenue, it’s time to explore your funding options. If you and your business have great credit and long credit history, you’re in luck –– your funding options will be plenty. But if you’re struggling against a short history or poor credit, then you’ll need to find a business loan for bad credit.

Pros and Cons of Business Loans

Business loans provide a safe, reliable way to get business funding for growth and marketing, but they have benefits and drawbacks.


  • There are a wide variety of business loans available, so it’s possible to find a solution for nearly any business model
  • The process of applying for a business loan often forces business owners to “shape up” and performed detailed analyses of their business plan, cash flow, and revenue


  • Business loans are often slower than other forms of small business funding due to the amount of paperwork and waiting involved
  • Most business loans require credit checks, which can do further damage to injured credit
  • Bad credit business loans are known for higher interest rates, which can have a punishing effect on profits

What to Do if You Don’t Qualify for a Business Loan

Unfortunately, even after working hard to research your options, prepare your documentation, and apply for a bad credit business loan, you could still be rejected. If that happens, all hope isn’t lost! The next step is to work on building a positive credit history.

Work on Your Credit

  • Check your credit report often
  • Make all payments on time
  • Focus on eliminating existing debt to reduce your credit usage ratio

Consider Alternative Business Funding Solutions

Sometimes, a business loan simply isn’t the best option. For growing businesses that need flexible funding but struggle to qualify for a business loan, Payability is there.

Payability offers fast, flexible funding for eCommerce businesses that are ready to grow. Don’t let slow money and complicated business loans hold back your business growth –– invest in your enterprise today with cash flow solutions from Payability!

Invest in Your Business With Cash Flow Aids from Payability

Instant Access from Payability provides accelerated daily Amazon payouts, which means no more waiting for funds to clear –– get your cash the day after you make a sale. 

Instant Advance from Payability offers immediate access to growth funding for eCommerce businesses that are ready to take the next step. Invest in marketing, materials, software, or employees with up to $250k delivered in as little as one business day for qualified sellers.

Advance Line offers a flexible line of credit to growing eCommerce businesses. Pay only for what you use, keep total ownership and control of your business, and save money with early payment rewards.

Payability is the swiftest, most versatile cash flow aid for eCommerce sellers:

  • Lightning-fast approval –– Apply online with your eCommerce account to get approved in as little as 24 hours. No credit checks or complicated paperwork required!
  • Get your money on your schedule –– Most marketplaces hold your funds for days, or even weeks, at a time. Skip the wait and access funds from eCommerce sales on your schedule with Instant Transfer, Same Day ACH, or wire.
  • Get Cash Back –– On qualifying plans, earn up to 2% cash back on each purchase you make with the Payability Seller Card.

Take a bold step into the future with flexible business funding today!

Alison Sperling
Alison is the Director of Marketing at Payability. She has 10+ years of experience in marketing helping small businesses and startups find new tools to grow their business. Prior to Payability, Alison started the marketing team at Stack Overflow. Alison completed an MBA with a concentration in Finance from Syracuse University in 2011. She volunteers with several cat rescue organizations.

Share This

Copy Link to Clipboard