Business Loans for Bad Credit

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We all have experienced the immense volatility of the world economy in the face of a pandemic in recent months. Even well-managed businesses struggle, and a business loan can help fill in the gaps and provide access to funds to keep things running smoothly. But what if your credit score is less than optimal? Here, we will help guide you through your options to find the right loan.


We Cover in This Guide

  • What is a business loan for bad credit?
  • Types of business loans for bad credit
  • Lenders for business loans for bad credit
  • Pros and cons of traditional vs. alternative lenders
  • How to apply for a business loan for bad credit
  • FAQ’s

What is a Business Loan for Bad Credit?

Bad credit is typically defined as a score lower than 630. There are options available even with poor credit, but, as with any loan, a good rate will be largely determined by your business’ score. How long you have been in business and your annual revenue will factor in as well.

Here is an overview of the options available for business owners with a poor score.

Types of Business Loans for Bad Credit

There are many types of loans, but they are most often broken down as follows:

  • Lump-sum loan
    This type is a straightforward loan with a typically fixed interest rate. The borrower repays what is borrowed with interest. There are many reasons a business owner would consider a lump-sum, namely the flexibility he or she may have to appropriate the funds for expenses or projects.

  • Line of credit
    This is another flexible way to pay the bills. Think of it as similar to a credit card for your business, where a business is approved for a maximum amount which can be used to cover a wide range of expenses, such as gaps in cash flow and even capital acquisitions. The better the credit score, the better the interest rate and limit.

  • Unpaid invoice financing
    This is designed to cover a majority of an unpaid invoice (or invoices), where the lender holds back a percentage until the customer pays up. At that point, the remainder of the funds is deposited. Consider this option very cautiously, as the fees can add up quickly.

  • Merchant Cash Advances (MCA’s)
    This is much the same as a personal cash advance with high fees and penalties associated, including a percentage of future sales, and the interest rates can be in the triple digits. MCA’s are used to acquire capital speedily and should be paid back as quickly as possible. Often, people take these loans out of desperation just to stay afloat.

  • Equipment loans

This type of loan can be used to obtain equipment even if cash is not on hand. It covers all or most of the cost upfront and uses the purchased asset as collateral.

A note about government-sponsored loans:

SBA loans are a specific type of loan furnished by various financial institutions and backed by the government. They have broad applications and are particularly beneficial after a crisis. Unfortunately, especially in light of the pandemic, they take a long time to apply and require a good credit history. We will not cover all the details in this guide, but you can click here to review your options for federal loans.

Lenders for Business Loans for Bad Credit

There are many types of lenders, from traditional financial institutions to venture capitalists to family members. The most common lenders are banks, but there are also alternative lenders. This is where low-credit score borrowers have the most options. Non-traditional lenders typically do not have a brick and mortar location and fall into two categories: direct and peer-to-peer (P2P) lenders. Direct lenders may be partially funded by banks, but operate independently from them and other traditional financiers. P2P lenders work directly with businesses. Both offer fast and flexible loans.


Benefits & Drawbacks of a Bank Loan vs. a Non-Traditional Business Loan

Loan Type Details Pros Cons
Bank Loan Loan furnished by a bank. Designed for a wide range of businesses. Low, fixed rates Good credit needed to qualify for a competitive APR
Broad use for lent funds Lengthy application process
Predictable payments Collateral typically required
. Slow approval
Alternative loan Furnished by online or non-bank lender. There are direct lenders and peer-to-peer (P2P) lenders. Good options for low credit borrowers Typically higher interest rates
Range of loan amounts Hidden fees to watch out for
Quick application process Less of a track record for non-traditional lenders
Quick access to funds Harder to secure a smaller loan

How to Apply for a Business Loan for Bad Credit

Here is an overview of what kind of documentation you will need to apply for a business loan. As you will see, there can be a lot of information required, depending on your business and the type of loan you are taking out. In cases where your credit is poor, this can be a good thing, as you will want to prove your worthiness of the loan with info other than your credit score.

Your application checklist:

  • Resumes of owners and top leadership
  • Tax returns - both personal and business
  • Financial statements - balance sheet, income, bank statements, etc.
  • Collateral assets (if applicable)
  • Accounts payable and receivable
  • Business Plan
  • Legal forms - contracts, licenses, lease and franchise documents, etc.
  • Credit report

Once you have what you need, click here to apply with a reputable lender committed to working with your credit score to get you the best rate possible.

If you still have questions about how to apply, here are some frequently asked questions.


Q: What are the costs or fees associated with a business loan?
A: In addition to interest, there are underwriting and origination fees as well as closing costs. Look out for tacked on fees, which may be negotiable.

Q: What are some other options if my interest rate is too high?
A: Consider a secured loan that is backed by assets instead of reliant on your credit score. If you are comfortable using assets such as property, equipment, and vehicles as collateral, it can be an option to help lower your APR.

Q: What is a personal guarantee on a business loan?
A: This is when the borrower promises to cover the loan if the company defaults. This helps mitigate the risk associated with loans for small businesses in particular.


We are here to help you with all your business needs. There are many ways to secure funds for your company, but having a bad credit score will limit your options. Let us guide you through this process so you can keep your business going successful.