Are you having trouble getting a small business loan or line of credit? It can be hard to secure a small business loan with bad credit. But it is not impossible. Several alternative lenders offer funding solutions for individuals with bad credit histories.
Small business owners are often turned away by lenders when they have bad credit. That’s because a poor credit score implies you have not managed your finances properly in the past.
The good news is that alternative lenders and non-traditional types of loans are growing in popularity. Alternative lenders, for example, may not consider your poor credit history at all. Or they may rely on it to a smaller degree than traditional lenders. Instead, they focus on your operating history. This includes the strength of your business. For example, they look at revenue, potential, and other operational parameters in your small business loan application.
NOTE: The following list is for small businesses with bad credit and may not be helpful for entrepreneurs seeking a start-up loan. See Startup Funding for startups.
Where to Get Small Business Loans for Bad Credit
So, you have a bad credit score and now need to consider your options. Here’s our list of 15 places to find financing solutions for small business owners with a bad credit history.
One of the best things about Kabbage is that the company does not require a minimum credit score to qualify. This is a big deal compared to other lenders. It does check your personal credit history, however. If you are looking for some short-term working capital, Kabbage is worth trying. You can borrow from a line of credit and repay it on an as-needed basis.
To qualify, you should have a minimum annual revenue of $50,000 and have been in business for at least a year. You must also have a business checking account, bookkeeping software, or an online payment platform. You can qualify for up to $250,000 with loan terms as short as six months up to 18 months. The company charges no origination fee.
It only takes a few minutes to complete the online application process. And if approved, you can get business credit in just a couple of days.
Fundbox calls itself an invoice factoring company. It offers term loans between $1,000 and $100,000. And these can be paid over a 12 to 24 week period in equal weekly installments. Unlike other factoring options, it advances 100% of the invoice. Then it levies a reasonable interest rate, starting at 4.66%. It also waives interest for early repayment and charges no origination fees.
The company’s basic business requirements are generous and friendly to new businesses and those with bad credit. For example, the minimum FICO credit score is 500. You can be in business for less than a year, but must have revenue of $50,000 annually. Fundbox also takes the value of your invoices and the ability to repay the loan into consideration.
Funding is prompt and only takes up to three business days. But to qualify, you must use bookkeeping software or online accounting that can link to Fundbox. You also need a minimum of six months’ activity in one of these software applications.
OnDeck offers both term loans and lines of business credit. You can go for the term loan if you are looking for some quick cash to expand. If you want to manage your cash flow and working capital, a line of credit is your best option.
To qualify for OnDeck’s term loan, you must have a personal credit score of 500 or higher. For a line of credit, your personal credit score should be at least 600. You must also be in business for one year and have annual revenue of $100,000 or more.
Borrowing amounts are equal to 20% of your annual gross receipts. This amounts to between $5,0000 to $250,000. Loan terms are fixed-rate, self-amortizing, and cover six to 24 months. OnDeck also charges an origination fee of 2.5% to 4.0% on new loans.
Once you complete the online application process, you’ll get a decision within a few minutes. And funding or business credit is available as soon as the following day.
(Interestingly, OnDeck reports your payment activity to the three credit bureaus. This means paying off your small business loan on time can boost your credit score. And it makes you more attractive to other lenders.)
If you lack collateral, have bad credit, and have unpaid invoices, you may want to consider BlueVine. The lender offers an advance based on the value of your invoices. So, it looks at the financial strength of your debtors, not your business credit. It also determines approval on the strength of your cash flow.
You do need to have a personal credit score of 530 or more to qualify, however. Also, you should have at least $120,000 in annual revenue. And you need to have been in business for a minimum of six months.
The company offers several financing options. They include line of credit, invoice factoring, and term loans. Borrowing amounts range from $5,000 to $250,000. Loan terms are fixed-rate and paid weekly over six to 12 months. The company charges no origination fee.
StreetShares is an excellent option to explore if you have a new small business, especially if you are a veteran. That’s because StreetShares is veteran-owned. In fact, its motto is “bringing trusted digital finance to America’s heroes.”
The member-based company offers term loans, line of credit options, and contract financing. To qualify, borrowers must be in business for a minimum of one year. They also must have $25,000 in annual revenue. You also need to have a minimum personal credit score of 600 or more. And your business must have a steady cash flow to be eligible.
Borrowing amounts range from $2,000 to $250,000. Loan terms are three to 36 months. The company charges an origination fee of 3.95% to 4.95%.
Dealstruck is another option if you are looking for different loan products. The lender offers a term loan for expansion. It also offers an asset-based line of credit for businesses with unpaid invoices. Finally, there is an inventory line of credit for companies that have recurring inventory purchase requirements.
To qualify, you need to have a minimum personal credit score of 600. However, company CEO Ethan Senturia has said the company accepts credit scores in the 500 range. You also need at least $150,000 in annual revenue. And you must be in business for no less than one year.
Borrowing amounts are from $25,000 to $250,000. And the loan term is between one to four years. The company charges an origination fee of 2.99% to 5.99%.
If you operate a start-up business and have bad credit, Accion may be your best bet for loans.
The company makes loans for purchasing inventory. But funding is also available for buying or leasing equipment, hiring employees, and paying business expenses. Start-ups may need a business plan with a 12-month cash flow projection to qualify. Business owners must also have a minimum personal credit score of 575. And they must be current on all debt and bills.
Accion does not specify a minimum time to be in business. And it requires only the annual revenue be sufficient to repay the loan. Borrowing amounts vary greatly. They range from a very low $300 up to $1 million. Loan terms vary too. And the company charges an origination fee of 3% to 5%.
8. Can Capital
Can Capital offers small business loans for bad credit and merchant cash advances from $2,500 to $250,000. Its loans are intended to be used for working capital. And they come with relatively short repayment terms — six to 18 months.
The company promotes fast turnaround times for approving business credit. This could be as little as one business day once approved. Funding eligibility is not based on credit score alone but on business performance.
To qualify, business owners must be in business at least six months. They must have $150,000 or more in gross revenue. And they must have less than $175,000 in outstanding tax liens or judgments. They must also have no personal or business bankruptcy for at least one year. Borrowing amounts are between $2,500 and $200,000. Loan terms are fixed-rate and include an origination fee of 3%.
Credibly offers different business loan financing options. They include short-term (3-18 months), working capital, and business expansion loans. Merchant cash advances are also available. Terms range from 18 to 24 months. Borrowers can qualify for as much as $400,000.
Credibly uses a proprietary algorithm to qualify business owners. Businesses must be in existence at least six months. They must have an average of $15,000 in monthly bank deposits. They also must have a stable monthly revenue to qualify. Borrowers must also have a minimum FICO score of 500. The company charges an origination fee of 2.5%.
Applications can be approved within 24 hours. And borrowers receive funds as early as the same business day.
Lendio is different from the other alternative lenders. It is not a lender at all, but a lending marketplace. When you apply for a loan, Lendio matches you with other lenders. These include some of the lenders on this list. Loan types include term business loans, business line of credit, and merchant cash advances.
To qualify, you need a personal credit score of 550. You also need a minimum annual revenue of $50,000. You must also have been in business for at least six months. Lendio will likely match you with more than one lender. This means you can choose between the lowest interest rate and the highest loan amount. This helps you find the best fit for your needs.
Borrowing amounts are from $1,000 to $500,000. Terms for business loans are one to two years. And origination fees depend on the lender.
Upstart was founded by former Google employees. The online lender offers fixed-term P2P consumer loans to qualified borrowers but targets young adults. The site uses artificial intelligence to make financing decisions. Credit scores are considered in lending decisions. But those with little or no credit history can still receive financing. The underwriting process also looks at characteristics, such as education, credentials, and work experience.
Upstart doesn’t technically provide business loans. Borrowers can use funds for whatever reason they wish. The site focuses on activities such as reducing credit card debt and providing funds for education. It also focuses on paying for personal expenses.
Upstart isn’t a business lender. So loans require no minimum time in business or specified annual revenue. Borrowers must have a FICO credit score of at least 620, however. Loan terms are three or five years, and origination fees range from 0% to 8%.
Fundation is a business lender that offers conventional, fixed-rate installment business loans or a line of credit. The company is one of the top lenders in the alternative funding industry. This is due to its very reasonable terms and fees.
To qualify, business owners must have been in business at least one year. They must have at least three full-time employees (including the business owner). The business needs a minimum gross income of $100,000 per year. And a FICO credit score of 660 or higher is required.
Borrowing amounts are from $20,000 to $500,000. Loan terms cover one to four years. And there is a 5% origination fee.
PayPal acquired Swift Financial in 2006 and created LoanBuilder. It provides term business loans to small business owners.
LoanBuilder uses a “Business Health Credit Score.” This calculates credit score based on the applicant’s answers to the questions asked via the online “Configurator.” According to the website Working Capital, it looks for companies with a score of 55 or more. This is based on a variety of personal credit factors.
Companies must be in business for at least one year and have annual revenue of $100,000 or more. Borrowers can qualify for up to $500,000 in fixed-rate business loans. These must be repaid over a three to 12 month period. LoanBuilder charges no origination fee. And funds can be deposited in as little as one day.
According to its website, SmartBiz “streamlines SBA loans.” Like Lendio, it is a lending matchmaker. When you apply, it matches you with the lenders that best fit your needs. Options include borrowing money, refinancing, or purchasing commercial real estate. The company has a strong track record of lending success. It states that 90% of applications submitted to banks get funded.
SmartBiz matches borrowers with two types of loans: SBA and bank term. SBA loan interest rates are between 4.75% and 7%. Loan amounts range from $30,000 to $5 million, with repayment terms of 10 to 25 years. Bank term loans come with higher interest rates (7.99% to 24.99%). They also come with narrower loan amounts ($30,000 to $500,000) and shorter terms (2 to 5 years). If neither of those options is a fit, SmartBiz works with a network of lenders. So they can offer other financing solutions.
Some of the essential business requirements include a minimum of two years in business. The borrower must be a U.S. -based business. And it must be owned by a U.S. citizen or Lawful Permanent Resident. The borrower must also be at least 21 years old with a credit score of 640 or higher.
15. National Funding
National Funding is upfront with its declaration. It provides bad credit small business loans. The company offers high approval rates. It also offers fast funding, minimal paperwork, and renewal sources of capital.
National Funding offers a variety of loan types. They include working capital, equipment financing, merchant cash advance, and credit card processing. The company serves businesses in a broad range of industries. And it welcomes first-time borrowers.
For a business loan with bad credit, National Funding charges a 2% origination fee. It also requires you to have a business bank account with a balance no less than $1,500, but $3,500 is better. Other business requirements include a personal guarantee from the primary borrower. You should also have no bankruptcy within the past year. You also need a minimum personal credit score of 600.
FAQs: Small Business Loans, Bad Credit
What do lenders consider bad credit?
Generally, lenders consider anyone with a personal credit score of less than 580 to have bad credit. Traditional lenders (e.g., banks, credit unions) have even higher standards. They typically won’t make business loans for bad credit risks. This means people with a credit score of less than 620. Even scores slightly above 620 can result in a higher interest rate or lower small business loan amount. Bottom line: try to get your personal credit score as much above 620 as possible.
For more about the minimum scores you need, read Credit Score for a Business Loan.
Is it possible to get a loan with no credit check?
Yes, you can get a small business loan from some lenders with no credit check required. This is a good option for those with poor credit. The options for how to get a loan for business with no credit check are limited. But you can find them. Look for lenders that do not rely on credit history. These include alternative lenders offering cash advances, invoice factoring, and working capital loans.
Where can I get a loan with no credit check?
You might be surprised that some common household names in small businesses offer a no-credit-check loan. PayPal Working Capital is one example. Small businesses using a PayPal business account and processing $15,000 or more in annual payments can apply for financing. PayPal states right on its website:
No credit check. Your loan is based on your PayPal sales, so no credit check is required, and it doesn’t affect your credit score.
Square Capital is another popular example of a lender requiring no credit check. Square Capital is open to any business that uses the Square payment processing device. Here’s how it works. Square knows your history of payments received. And it can estimate how much you will receive in the future. The loan amount is based on your volume. Repayments are automatically deducted from future sales, according to the Square website.
A third example of a no-credit-check loan option is Stripe Capital. To qualify, you need to use the Stripe online payments system. Stripe works much the same as PayPal and Square. You repay the loan and any fees out of a fixed percentage of your future sales processed through the system.
There are many other cash advance lenders like these. Check for online lenders that provide cash advances without a credit check.
What types of loan products are for poor credit?
When you are searching online or contacting lenders who provide funding for people with poor credit, focus on the following loan types. These products are friendlier toward small businesses with low credit scores.
Short-term loans. These are quick, flexible financing. They do not require a long commitment. In some cases, they may be repaid weekly.
- Pro: Relaxed eligibility.
- Con: Higher interest rates and short repayment times.
Accounts receivable financing. This financing option, also known as “factoring,” uses unpaid invoices as collateral.
- Pro: Borrowers get a fast infusion of cash.
- Con: Receivables are purchased at a discount rate (meaning you receive less than the full value of the amount owed you for your receivable).
Equipment financing. This option is for financing to purchase new equipment or replace worn equipment.
- Pro: Provides money to buy, repair, or lease equipment.
- Con: The loan is restricted to the value of the equipment.
Merchant cash advance. This is a financing option for a business with a solid sales record.
- Pro: You receive funds quickly.
- Con: Lenders charge high fees. (You likely have to give the lender access to your financial account(s) to deduct payments automatically. This means you lose some control over your funds.)
How can I improve my chances of getting a business loan with bad credit?
The saying “If at first you don’t succeed, try, try again” applies to people seeking business loans for bad credit too. If you are having difficulty getting a small business loan, line of credit, or another type of business financing, these approaches may help:
- Get a cosigner. If you have bad credit and cannot get a loan on your own, find someone with good credit to cosign. This may be your only option. That does mean the person is responsible for repayment in the event you forfeit. So it’s risky business on their part.
- Ask for less money. Sometimes denials due to bad credit are partial or have to do with the amount you requested. It’s easier for lenders to take a risk for a small amount than a large amount. If your cash flow can handle it, consider asking for a much lower amount at first. Then repay that amount to establish a good repayment record. A small community bank may be more inclined to work with you in this way.
- Apply for personal loans. When other forms of financing don’t work, small business owners can consider personal loans. Personal loans work best when you only need a small amount of money for a short time. As with a credit card, they come with high APRs. And they require a credit score of at least 580.
What else can I do if I am denied a business loan?
If you have tried to get a small business loan with bad credit and struck out, all is not lost. There’s more than one way to achieve your goals and improve cash flow. Here are some other strategies to consider:
- Use a credit card. Instead of applying for a business loan through lenders, use a credit cards. Many small businesses rely on their credit card. But this is an expensive way to fund a business. Credit card issuers determine annual percentage rates (APR) based on personal credit scores.
- Get a loan from family or friends. If all else fails, borrow the money needed to fund your business from family or friends. This may be your only and last resort. In this case, however, the risk is not merely financial but personal as well. Make sure the friend or family member understands the potential consequences.
- Get creative with crowdfunding. Crowdfunding uses small amounts of capital obtained from a large number of individual investors to finance a business. It is often used with startup business loans. Consider sites like Kickstarter and Indiegogo. But these sites use an all-or-nothing approach to lending. If you don’t reach your funding goal, investors aren’t charged. And you don’t get any money.
- Improve your credit. It takes time to improve a credit score. But sometimes you get further ahead in business by taking a step back. Those with poor credit scores may want to try secure credit cards, which require a deposit of funds. The use of a secure card demonstrates a good repayment history. It can help improve your credit score.
Don’t Let Bad Credit Stop You
A bad credit score may create delays and extra work when you try to get a business loan or line of credit from lenders. But don’t let a bad credit score stop you from exploring options. Even with bad credit scores or poor business credit, some lenders will offer loans. Understand your needs, look for, and compare options.
In the meantime, do everything you can to improve your credit score. Pay your bills on time. Talk to any existing creditors to work out more favorable payment arrangements. Keep balances low on any revolving credit. And check your score regularly to watch for changes. Also, dispute any errors you find on your credit report.
A bad credit score should not be a roadblock to achieving your business goals. By staying focused, you can get the funds you need to grow.
Related reading: How to Fix a Bad Credit Score
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