Accessing business financing with a low credit score may seem impossible—but it’s not. In fact, several lenders and financial institutions now offer business loans for bad credit tailored to support small business owners who may not meet traditional lending requirements.
Whether your credit score took a hit due to past issues or your business is new and lacks credit history, this guide will walk you through the best loan options, how to qualify, what to expect, and tips to boost your chances of approval.
Understanding Business Loans for Bad Credit
Bad credit typically refers to a personal FICO score below 580–620, though some business lenders may consider anything under 650 to be less than ideal.
But don’t worry — credit score isn’t the only metric lenders consider. Revenue, time in business, cash flow, and collateral are often more important for alternative and fintech lenders.
Common Loan Types for Bad Credit Businesses
| Loan Type | Description | Ideal For |
|---|---|---|
| Merchant Cash Advance | Advance based on future card sales | Retail & food businesses |
| Invoice Financing | Advance on unpaid invoices | B2B service companies |
| Short-Term Loans | Lump sum with short repayment window | Emergency needs |
| Equipment Financing | Loan backed by business equipment | Businesses needing machinery/tools |
| Business Line of Credit | Flexible access to funds, pay interest only on used amount | Working capital, managing cash flow |
| Microloans | Small loans from nonprofits or CDFIs | Startups and underserved businesses |
Top Lenders Offering Business Loans for Bad Credit (2025)
Here are the top-rated lenders you can explore if your credit score is less than perfect:
1. Fundbox
- Minimum Credit Score: 600
- Loan Type: Line of Credit
- Loan Amount: Up to $150,000
- Funding Time: 1–3 business days
- APR: 10%–30%
Pros: Fast approval, flexible draw terms
Cons: Lower limits for newer businesses
2. BlueVine
- Minimum Credit Score: 625
- Loan Type: Line of Credit
- Loan Amount: Up to $250,000
- Funding Time: Same day possible
- APR: 15%–45%
Pros: High credit limit, weekly payments
Cons: Not available in all states
3. Credibly
- Minimum Credit Score: 500
- Loan Type: Working Capital Loan
- Loan Amount: $5,000 to $400,000
- Funding Time: 24–48 hours
- Factor Rate: Starts at 1.15
Pros: Low credit threshold
Cons: Higher cost of capital
4. Lendio
- Minimum Credit Score: 500
- Loan Type: Loan Marketplace
- Loan Amount: Up to $500,000+
- Funding Time: Varies (1–5 days)
- Rates: Varies by lender
Pros: One application, many loan offers
Cons: May receive multiple lender contacts
5. PayPal Working Capital
- Minimum Credit Score: None (based on PayPal sales)
- Loan Type: Cash Advance
- Loan Amount: Varies based on PayPal volume
- Funding Time: Instant after approval
- Fee: Flat fee (not interest-based)
Pros: Easy access for PayPal users
Cons: Requires active PayPal business account
What Lenders Consider Besides Credit Score
Even with bad credit, you can improve your odds by demonstrating other financial strengths.
| Criteria | Why It Matters |
|---|---|
| Business Revenue | Shows ability to repay loans |
| Time in Business | Longevity equals stability |
| Cash Flow Health | Lenders want to see positive cash flow |
| Collateral Availability | Reduces lender risk |
| Industry Type | Some industries are more “fundable” |
How to Increase Your Chances of Getting Approved
If your credit score is holding you back, here are some actionable tips:
1. Maintain Strong Cash Flow
Even with bad credit, lenders love consistent revenue. Use accounting tools like QuickBooks or Wave to track income and expenses clearly.
2. Offer Collateral
If possible, secure your loan with business equipment, inventory, or even real estate to improve approval odds and rates.
3. Start Small
Requesting a smaller loan amount reduces risk for the lender, making it more likely to be approved.
4. Consider a Co-Signer or Partner
If someone with better credit can join the application, it can help get approval and better terms.
Best Loans for Different Bad Credit Scenarios
| Business Scenario | Recommended Loan Type | Why It Works |
|---|---|---|
| Brand new business | Microloan, crowdfunding | Low credit requirement, startup-friendly |
| Credit score under 550 | Merchant cash advance | Based on revenue, not credit |
| Strong invoices but bad credit | Invoice financing | Uses unpaid invoices as collateral |
| Needing new equipment | Equipment financing | Secured by the equipment itself |
| Inconsistent sales but long business history | Working capital loan | Can qualify based on time in business |
Costs to Consider
Business loans for bad credit usually carry higher costs due to the risk for the lender. Be sure to compare fees and terms.
| Cost Component | Typical Range |
|---|---|
| Interest/Factor Rate | 15% to 60%+ |
| Origination Fee | 1% to 6% |
| Prepayment Penalty | Some have fees for early payoff |
| Late Payment Fee | $10–$100+ |
| Draw Fees (LOC) | 1%–3% per withdrawal |
Red Flags to Watch Out For
When seeking loans with bad credit, scams and predatory lenders are common. Here’s what to watch:
- 💣 Unclear terms or hidden fees
- 💣 No phone support or verifiable address
- 💣 Guarantees of approval (legit lenders never guarantee approval)
- 💣 High upfront fees just to apply
Always research lenders thoroughly and read user reviews on platforms like Trustpilot, BBB, or NerdWallet.
Improve Your Business Credit Over Time
Securing financing with bad credit is possible — but working toward better credit will unlock lower interest rates and better loan terms.
✅ Tips to Rebuild Business Credit:
- Apply for a business credit card and use it responsibly
- Open vendor trade lines (e.g., Uline, Quill) that report to credit bureaus
- Pay all business bills on time or early
- Monitor your credit through services like Nav or Dun & Bradstreet
Is a Bad Credit Business Loan Right for You?
Yes, if:
- You need urgent funding to maintain operations
- You have strong revenue or invoices to offset your credit
- You’re confident in your repayment ability
No, if:
- You’re already in debt with no clear repayment plan
- You can wait and improve credit before borrowing
- You want a long-term, low-interest loan
Conclusion: Don’t Let Bad Credit Hold Your Business Back
While having a low credit score can make getting traditional bank loans difficult, it doesn’t mean you’re out of options. Many alternative lenders, fintech platforms, and specialized loan programs are designed specifically for business owners with bad credit.
By understanding what lenders look for, choosing the right type of financing, and borrowing responsibly, you can secure the funds you need to grow — and even begin rebuilding your credit in the process.