Small business assistance
Poor credit score for business loans

Top Business Loans for Bad Credit

Securing business loans with bad credit can be daunting, but it is not impossible. This guide will review the options and resources available to small business owners with poor credit scores looking for financial assistance to grow their businesses.

To get ready for applying for a business loan with bad credit, we’ll go over the significance of the following tasks:

  • examine personal and business credit records
  • paying off existing debts
  • identifying possible guarantors

We will highlight the following Small Business Administration programs that cater specifically to small businesses that need funding:

  • SBA Microloans Program
  • SBA 7(a) Loan Program
  • SBA 504/CDC Loan Program

Lastly, our guide will provide valuable information on utilizing the Small Business Assistance Tool to access no-cost to low-cost one-on-one help to avoid predatory lenders. 

Non-traditional Financing Options

If your small business has a bad credit score, securing financing through traditional banks might not be your best option.

However, there are alternative options available that prioritize cash flow over credit scores, making them more accessible for businesses with past financial difficulties.

This section will explore two non-traditional financing options: invoice factoring accounts receivable financing and merchant cash advances.

Invoice Factoring Accounts Receivable Financing

Invoice factoring accounts receivable financing is an option where companies sell their outstanding invoices to a third-party company at a discount in exchange for immediate cash.

This type of funding allows you to access the money tied up in unpaid invoices without waiting for customers to pay. Since the focus is on your client’s ability to pay rather than your credit history, this option may be suitable even if you have bad credit.

Immediate access to funds.You receive less than the total value of the invoice.
No need for collateral or personal guaranteesFees can add up quickly if not managed properly.
Based on clients’ payment abilities instead of your credit score.Relies on having consistent invoicing practices and reliable customers who pay promptly.

Merchant Cash Advances

A merchant cash advance (MCA), another alternative lending solution for businesses with bad credit scores or limited borrowing history, provides upfront capital in exchange for a percentage of future sales revenue from debit and credit card transactions.

This option is particularly useful for businesses with strong sales but poor credit, as the focus is on your company’s revenue rather than its creditworthiness.

Quick access to funds.High-interest rates and fees compared to traditional loans.
No collateral or personal guarantees are required.It can reduce cash flow due to a percentage of daily sales being withheld for repayment.
Based on business revenue instead of your credit score.Not suitable for businesses without significant debit/credit card sales.

By focusing on cash flow over the borrower’s overall credit score, these options provide much-needed financial support that enables growth and expansion despite past financial difficulties.

Non-traditional financing options can give the capital needed to grow businesses without perfect credit. Getting ready for loan submission is necessary to increase the chances of success and get the most favorable terms available.


Small businesses with poor credit scores can obtain financing through non-traditional options like invoice factoring, accounts receivable financing, and merchant cash advances, prioritizing cash flow over credit scores. Understanding these options’ potential drawbacks and fees is crucial.

Preparing Your Business for a Loan Application

Do the following before submitting a loan application to increase your chances of being approved for a suitable loan to meet your needs and preferences:

  • Assess personal and commercial credit scores.
  • Reduce existing debt obligations.
  • Consider co-signers with favorable ratings. 

Let’s take a quick look at these options.

Checking Personal & Commercial Credit Histories

To begin with, review both your business credit report and personal credit report. Reviewing your personal and business credit reports can assist in pinpointing any discrepancies or areas for improvement.

If necessary, dispute any errors in the reports to ensure they accurately reflect your financial situation.

Paying Down Existing Debts

Paying outstanding debts is crucial when securing a business loan with bad credit. 

Focus on reducing high-interest debt first while maintaining minimum payments on other accounts. This strategy improves your overall debt-to-income ratio and demonstrates responsible repayment habits that lenders appreciate.

  • Create a budget plan that prioritizes debt reduction.
  • Avoid taking on new debt until current obligations are under control.
  • If possible, consolidate multiple loans into one lower interest rate payment plan through an online lender like Rapid Finance.

Identifying Potential Co-Signers

Finding someone with a strong credit score to co-sign your loan application can increase the likelihood of approval. A co-signer vouches for your ability to repay the loan, providing additional security for lenders and potentially lowering interest rates.

When seeking a potential co-signer:

  1. Consider close friends or family members who have demonstrated financial responsibility.
  2. Ensure they understand the risks involved in co-signing, including their credit being affected if they default on payments.
  3. Draft a written agreement outlining each party’s responsibilities and expectations regarding repayment terms and conditions.

In addition to these steps, utilizing resources like our Small Business Assistance Tool can point you to valuable guidance during this process. 

Preparation, following best practices, and exploring Small Business Administration programs can increase the likelihood of securing financing that meets the needs of those with bad credit while avoiding predatory lending practices.

Key Takeaway:

Suppose you have bad credit scores and seeking a business loan. In that case, you can improve your chances of securing financing and avoid predatory lending practices by checking your credit histories, paying off existing debts, identifying potential co-signers, and using resources like our Small Business Assistance Tool to connect you to the help you need.

Small Business Administration Programs

There is hope if you’re a small business owner with bad credit. The Small Business Administration (SBA) offers various programs designed specifically to help entrepreneurs access funding despite having damaged records. 

These include microloans, 7(a), and 504/CDC schemes to facilitate growth and expansion within target industries and sectors across the United States.

SBA Microloans Program

The SBA Microloan program provides loans of up to $50,000 for small businesses that may not qualify for traditional bank financing due to poor credit or lack of collateral. 

Who this program benefits: 

  • startups
  • home-based businesses
  • companies needing working capital or equipment purchases

With lower interest rates than many other loan options and flexible repayment terms based on your unique financial situation, SBA microloans can be an excellent option for those struggling with bad credit.

SBA 7(a) Loan Program

The SBA 7(a) Loan Program is a popular option and offers loans ranging from $5,000 to $5 million with more lenient requirements than traditional banks and can be used for the following purposes:

  • purchasing real estate
  • purchasing equipment
  • refinancing existing debt
  • providing working capital

While these loans still require a minimum personal credit score typically around 640-660+, they offer more lenient requirements than traditional banks, making them more accessible even if your credit score isn’t perfect.

SBA 504/CDC Loan Program

If your small business needs financing for major fixed assets such as real estate or equipment, the SBA 504/CDC Loan Program might be an ideal solution for business loans for bad credit.

This loan option provides long-term, fixed financing with lower down payment needs and competitive interest rates.

While borrowers must still meet specific eligibility criteria, including a minimum personal credit score of around 680+, this program is designed to help businesses that may not qualify for traditional bank loans due to bad credit or other financial challenges.

By exploring these SBA programs and working closely with a knowledgeable lender who understands your unique circumstances, you can increase your chances of securing the necessary funding to grow and expand your business despite having bad credit.


There is hope! Despite bad credit, small business owners can access funding with lower interest rates and lenient requirements through the Small Business Administration’s loan programs, such as microloans, 7(a), and 504/CDC by working closely with a knowledgeable microlender and exploring these options. Connect with a microlender using our Small Business Assistance Tool.

Utilizing the Small Business Assistance Tool

Our Small Business Assistance Tool offers no-cost to low-cost personalized help to small business owners looking for business loans for bad credit seeking advice on avoiding predatory lending and improving their chances of securing a business loan.

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Use this helpful online tool to connect with a microlender and get assistance with small business loans for bad credit. 

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Accessing No-Cost to Low-Cost One-On-One Help

You can receive tailored recommendations to help secure the funding needed for success by answering a few questions about your business needs. 

Whether finding suitable lenders, understanding different loan types, or navigating repayment terms – this no-cost to low-cost service can make all the difference in helping you secure much-needed funding.

  • Expert Guidance: Receive advice from knowledgeable finance, marketing, and operations professionals.
  • Tailored Recommendations: Get matched with resources that align best with your unique circumstances and objectives.
  • No-Cost to Low-Cost: Access invaluable support without spending any out-of-pocket money – perfect for cash-strapped entrepreneurs.

Avoiding Predatory Lending Practices

Predatory lenders prey on vulnerable borrowers by offering exorbitant interest rates and unfavorable terms. These unscrupulous businesses often target individuals struggling financially due to bad credit scores or other challenges. 

Remember to explore alternative lenders, non-traditional financing options, and Small Business Administration – all while utilizing the invaluable support the Small Business Assistance Tool provides.

Best Practices for Fixing Your Credit

To stabilize your company’s financial situation and improve your chances of securing a business loan with bad credit, consider implementing the following best practices:

Raising Prices & Negotiating Payment Terms

One way to boost your revenue and reduce outstanding debts is by raising product or service prices. This can help you generate more income while still maintaining customer satisfaction. 

Additionally, negotiate better payment terms with suppliers to ease cash flow issues. For example, ask for extended payment schedules or reduced interest rates.

Monitoring Business Credit Regularly

Maintaining a healthy business credit score is crucial when applying for loans or other financing options. Regularly monitor your personal and business credit scores and review credit reports from significant bureaus like Experian, Equifax, and TransUnion

You can take proactive steps towards improving by staying informed about changes in your scores and identifying any errors in your reports.

Opening Accounts Designed For Damaged Records

If you have a poor personal or business credit history, opening accounts specifically designed for individuals with damaged records can be beneficial in rebuilding it over time. 

Some banks offer secured credit cards that require an initial deposit but report positive activity to the major bureaus which will gradually increase your score.

Finding a Co-Signer With High Scores

A co-signer with high credit scores may provide lenders the assurance they need to approve an application despite bad credit. 

A co-signer vouches for you and agrees to take responsibility for the repayment terms if you default on the loan. This can give lenders additional assurance, making them more likely to approve your application despite bad credit.

Incorporating these best practices into your financial management strategy will help fix your credit. Remember that rebuilding credit takes time and effort, so be patient and persistent in implementing these changes.

Key Takeaway:

To increase the chances of securing a business loan with bad credit, individuals can improve revenue and negotiate payment terms, monitor credit scores for errors, consider opening accounts for damaged credit, find a co-signer with high scores, and be patient and persistent in implementing changes to rebuild credit.

FAQs Concerning Business Loans for Bad Credit

Yes, bad credit can impact your ability to secure a business loan. When evaluating loan applications, lenders typically consider an applicant’s personal and commercial credit history.

You can use your Employer Identification Number (EIN) to apply for certain business loans, such as Small Business Administration (SBA).

However, most lenders will also require your personal information and evaluate both personal and commercial credit histories during the application process.

The easiest SBA loan to obtain is likely the SBA Microloan Program, which offers smaller loans up to $50,000. 

These loans are designed for startups or growing small businesses that need working capital or funds for equipment purchases. 

The approval process tends to be more lenient compared to other SBA programs

Credit score requirements vary by lender and type of business loan. Traditional banks usually require a minimum FICO score of 680-700; however, alternative lenders may have lower thresholds.

A credit score of 640 or higher is typically required for SBA loans. It’s important to research specific lenders and loan programs for their requirements.


Improving your chances of securing business loans for bad credit involves checking personal and business credit scores by trying the following suggestions:

  • Pay down outstanding debts.
  • Identify potential co-signers.
  • Apply through CDFIs for more lenient loan terms. 

Correcting errors in financial reports, increasing revenue by raising product/service prices, and negotiating extended payment terms with suppliers/vendors are best practices to fix your credit as a small business owner.

Alternative options like invoice factoring, accounts receivable financing, and merchant cash advances are alternative funding sources for businesses with bad credit.

If you need help securing a business loan or avoiding predatory lenders, use the Microenterprise Collaborative’s Small Business Assistance Tool and connect with one of our small business microlenders.

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