How to get business loans for bad credit

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Business loans for bad credit

A business loan can be an essential step in advancing your business. But unfortunately, bad credit can be a barrier to getting the funds they need to expand their business to some companies. 

However, believe it or not, bad credit does not have to hold you back. It might take a few extra steps, but you can still get a business loan with bad credit. You just need to know what loans to look for and how to improve your credit. 

Can you get a business loan with bad credit?

A credit score is a factor in determining if a business loan will be approved, but this is not the only factor. Lenders also look at how long you have been in business and even how much annual revenue you have earned. These requirements tend to determine if a company is likely to repay the loan. 

What do leaders consider bad credit?

Lenders have different requirements when looking to approve loans for a business. Generally speaking, a credit score of 640 is considered a good score, but some loans will approve customers with a score as low as 550. 

Where to get a business loan for bad credit

In some cases, having bad credit does not mean you lack loan options. Here are some ways to combat your bad credit and still get the loan you need:  

Online lenders

Online lenders can provide loans to businesses that can tailor to their needs while also taking into account their bad credit. Online lenders can provide a broader range of options, terms, and payments for small businesses versus a more traditional lending route. This option can be ideal for companies with bad credit because the lender provides 


The Community Development Financial Institutions (CDFI) program provides private funding certified by the U.S Department of the Treasury’s CDFI Fund. These institutions offer, amongst other services, affordable lending to the community via credit unions, banks, loan funds, and venture capital funds. 

To qualify, you must obtain CDFI certification. In addition, your business must also provide services to an underserved population or area and promote economic development. CDFIs are an excellent option for small businesses with bad credit if you are eligible because the award is given to those businesses that qualify. It may appear a risky investment to others. 

They also tend to offer lower interest rates. However, it is essential to note that becoming certified can take time. 


Microlenders provider loans work similarly to standard loans; the main difference is that they are offered in smaller increments, hence the term “micro.” They typically are for less than $50,000. 

Small businesses are the target for microloans since these lenders expect that small businesses tend to have poor or no credit. As a result, the terms for microloans tend to be lower. In addition, the interest rate is competitive, making them a good option for small businesses with bad credit or in general. 

Invoice factoring

Invoice factoring is an option for businesses that use invoices. This type of loan allows the business to sell its outstanding invoices to a factoring company. The business would receive some of the invoice profits upfront; this could be between 70% and 95%. 

Your business is then charged a percentage on the invoice until the loan is paid. This method can work for businesses with no credit because there is no loan application. You agree with the company that you will pay them back with or without recourse. 

With recourse, if you do not pay the invoice back, your business must purchase the invoice from the invoice factoring company at the end of the terms. A non-recourse factoring agreement means the factoring company takes all the risks if your business does not pay the loan back. 

Banks and credit unions

Banks and credit unions can still be an option if you have bad credit. These are the standard loans that most are familiar with when looking at lenders. 

Banks and credit unions might have more requirements for approval than just a high credit score, which could work for your business if the score is not the best. Banks and credit unions look at time in business and your business’s revenue. 

They will likely need a business plan explaining your plans for the funds. Considering that your credit score is not the only factor, this provides more opportunities for approval if all these things are in order. Keep in mind that banks and credit unions may also offer secured loan options meaning they will need collateral. 

7 tips for obtaining a business loan with bad credit

Once you’ve figured out where you want to obtain your loan, here are some extra tips that may help you increase your approval odds! 

Check your credit

Checking your credit to make sure your information is accurate is very important. If you find any mistakes in your report, work on getting them rectified before applying for the business loan. 

It is also essential to be aware of your credit score. For example, if you know a loan requires a score of 680 and your business score is 550, it will save you time, money, and an unnecessary credit inquiry to be aware of the discrepancy between the requirements and your actual score. 

Check your eligibility

Loans have requirements outside of just your credit score. For example, a loan could require a minimum annual revenue amount, cash flow requirements, and even a specific requirement for time in business. 

Look over all the loan requirements to ensure that you are eligible. Again, much like knowing if your credit score qualifies, knowing if you qualify for the loan based on its requirements can save you time and money. 

Write a clear business plan

Having a well-written business plan is essential when requesting a loan. Make sure your business plan clearly states the purpose of the loan and includes a description of your products or services, your marketing strategy, and a marketer analysis. A great business plan can improve your approval chances. 

Shop around

It could be tempting to apply for the first loan you see. Try to avoid the temptation and do your research first. 

Review different lenders and loan options to see which works best for you. You might find a lender who can accommodate your needs and provide you with the best deal. 

Wait if you can

Unless you absolutely need the loan right away, consider waiting before you apply for the loan. After checking your credit, you might notice areas where you could improve your chances of getting better loan terms by increasing your score. 

Wait to get those issues cleared up and build up your credit score, and then apply for the loan. It might take a little longer, but waiting could save you money in the long run. 

Consider repayment terms

Be sure to stay informed about the repayment terms of your loan. The terms can differ based on your credit. There might be a higher APR, longer or shorter term life, and even additional costs. 

A higher APR could mean higher payments, though those could be helped with an early payoff. Just check with your loan company to ensure that there are no fees associated with paying off your loan early. 

Get a cosigner

A co-signer is another excellent option if you do not qualify for a loan. Just be sure to select a trustworthy co-signer with good credit. A co-signer might be able to help you qualify for a loan, which may increase the likelihood that you will obtain better terms for your loan. 

Build your business 

Having bad credit can be challenging, but it does not mean that you have to pause the process of building your business. There just might be some additional steps along the way. From microlenders to CDFIs, there are many options for business loans with bad credit. So, don’t count yourself out. Put these steps into practice and you might just see your chances for approval go up even faster than you could have planned.


Can I get a business loan with bad personal credit?

It is possible to get a business loan with bad personal credit but it does play a role in your approval process. Depending on your score and credit history, your personal credit can affect your approval or even your interest rate.

Can you get an SBA loan with a 500 credit score?

Most loans require at least a 550 credit score.

How do you get business credit?

ake sure your business EIN is registered, apply for things like business credit cards, and use services that report to the credit bureaus. It is also important to monitor your business credit much like your personal credit and stay on top of an error.

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