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If you have bad credit and a keen need for working capital, then considering a business line of credit for bad credit is a must. A line of credit can give you sustained access to revolving credit that you can draw from to cover your business’s running expenses.
But because of the sustained credit business lines of credit offer, many providers are stingy with extending them. Not to worry, though—many online lenders have begun offering short-term lines of credit that are available to business owners with bad credit. Fortunately, these lenders offer stellar options for those looking for a business line of credit with bad credit.
Here is your go-to resource on finding a business line of credit with bad credit.
If you have good credit, the first place you would probably go as a source for a credit line would be your own bank. Unfortunately, if you have bad credit, this is likely not an option.
That said, you still have many sources for a small business line of credit for bad credit. To find the perfect fit and absolute best terms, you should plan to comparison shop among several lenders.
Below are some of the best options to consider from online lenders if you have bad credit.
Headway Capital offers a line of credit up to $50,000 in revolving funds for small business owners. One of the benefits is that you can choose between monthly or weekly payment options and terms up to 24 months with no early pay-off fees.
Headway Capital is one of the easiest business line of credit for bad credit to qualify for online. They have a quick application, simple document requests, and can get an answer to you in an under a week.
They also have some of the least stringent eligibility requirements to boot:
If you’re running a young business that’s still building up your credit and revenue, Headway Capital is a good option to get access to capital for times when your business might need it unexpectedly.
However, since Headway Capital offers lines of credit to bad credit borrowers, they also have the highest interest rates and lowest loan amounts.
Headway Capital provides:
If you can qualify for something better, it’s definitely better to go that route. But if you can’t and really need the cash, Headway Capital is your best bet for a business line of credit for bad credit.
Fundbox provides invoice financing that acts like it’s a line of credit. Because your outstanding invoices will back Fundbox financing, this is one of very few instances of a secured line of credit for bad credit borrowers. Although most of your options will be unsecured lines of credit for bad credit, Fundbox stands out: You will reap the rewards of secured funding—like more lax qualification requirements—without having to offer up your assets as collateral.
Here’s what you need to qualify for a Fundbox line of credit:
Fundbox does not require personal credit to get started. Instead, they use a custom-built business health assessment to determine your credit eligibility and limit by reviewing the data you share with them.
You only need to connect Fundbox to your business bank account—nothing else.
When you keep your Fundbox account connected, you’ll know what invoices are eligible for advances. When you need the cash, you can clear an invoice and pay it back over the 12 weeks or even earlier if you want—and save on the fees.
Here’s what a Fundbox line of credit will get you:
If you have a lot of unpaid invoices disrupting your short-term cash flow, Fundbox might be a good business line of credit for bad credit option for you.
Kabbage is a good option if your business is more established. So perhaps not the best business line of credit for bad credit option, but a good one if you can qualify.
Like Fundbox, Kabbage lets business owners link up their online financial services, including Intuit QuickBooks, business checking accounts, and Square. Kabbage determines financial performance by analyzing real-time metrics like average monthly revenue, seller rating, and transaction volume.
Kabbage also uses their “non-traditional” metrics to determine the amount of cash that can be made available to you, including an active and robust social media following.
All of this information is plugged into Kabbage’s underwriting platform, which provides an automated decision within minutes.
Here’s what’s required at a minimum:
This makes Kabbage a good option if you’ve been in business for a while but still have bad credit. If you do qualify, this is what a Kabbage line of credit can get you:
The only reason you wouldn’t apply for a Kabbage line of credit is if you can qualify for something with a better rate, but most lenders like Kabbage and Kabbage competitors have similar rates.
A credit score, as you might know, is a mark of your reliability as a borrower. Specifically, it is a number, generated from various factors, that determines how likely you are to pay your bills on time.
Factors that affect your credit score are:
What is classified as “bad credit” can vary, and lenders will evaluate credit in conjunction with your other business attributes—like revenue or time in business.
That said, if you have a credit score of 620 or below, it will be more difficult to qualify for business funding. A credit score of 620 or below will be a good queue to look for funding that’s easier to qualify, like short-term loans or business lines of credit.
Having bad credit is a pain. It can hinder you from getting financing for your business needs. Having good credit means you have more options and better rates.
The lower your credit score, the more you will need to shine in other areas to qualify for a business line of credit. But don’t despair—when it comes to business line of credit for bad credit, you have options.
If you own a business, you have two credit scores: a business credit score and a personal credit score. Just as your personal credit score measures your reliability as a borrowing individual, your business credit score measures your reliability as a borrowing business.
There are a few companies that calculate these credit scores. For businesses, it’s Experian, Equifax, and Dun & Bradstreet. For your personal score, it’s Experian, Equifax, and TransUnion.
You can access your credit scores from these company websites, or you can access them through sites like FreeCreditReport.com.
Though some business line of credit providers will look at both of these credit scores to determine eligibility, most lenders will pay more attention to your personal credit score to determine whether or not they want to extend a line of credit to your business.
So, when we say line of credit for bad credit, we’re referring to a struggling personal credit score rather than a struggling business credit score.
A business line of credit is flexible, revolving capital—similar to a credit card—except you get access to cash and, in many cases, lower APRs. And there are many business line of credit for bad credit borrowers available.
Lines of credit are agreements between lenders and borrowers that give a maximum loan balance that the borrower can pull funds from. With a line of credit, you can borrow funds at any time as long as you don’t exceed the maximum amount. Plus, you only have to pay interest on the funds you draw.
A business line of credit gives you capital to meet a variety of needs for your business—like covering payroll, buying inventory, and handling seasonal cash flow gaps. A business line of credit will give you easy access to cover day-to-day cash flow needs.
Plenty of financing options are out there for borrowers with bad credit, including short-term loans for bad credit and merchant cash advances, among others.
But here are the reasons a business line of credit for bad credit might be a good option for you.
If you need access to capital sooner than later, and don’t have time to work on raising your credit score, there’s still hope. To obtain a line of credit, you will probably need to supply some financial information about yourself and your business. Fortunately, the information you’ll need to apply for a line of credit isn’t just your personal credit score. There are multiple other factors of your business and personal finances that will matter to business line of credit providers.
One of the most important parts of your application is your business’s annual revenue.
The more you bring in, the better.
That should come as no surprise. A high revenue proves to lenders that your business takes in enough to pay back any capital you might draw from a business line of credit—bad credit scores aside.
Generally speaking, the line of credit you’ll qualify for will be around 8%-12% of your annual revenue.
Many online lenders require minimum annual revenue amounts ranging from $25,000-$500,000.
If you’re currently paying back a business loan, you might have trouble qualifying for a second product, even a business line of credit for bad credit.
Most lenders don’t want to take what’s called “second position” to another lender.
In other words, if you go bankrupt and your assets get liquidated, that original lender will be compensated for your remaining debt, leaving a second lender in a tricky position.
If a lender took second position to someone else, it means they wouldn’t get their money until the lender in first position is completely paid back.
With that in mind, if you don’t have any other debt obligation at this time, this will be a good sign to lenders.
Lenders want to know how well you manage your cash flow—and how much cash you tend to keep on hand.
Every lender’s main concern is whether you’ll be able to make their loan payments, so demonstrating that your business makes and keeps enough money to afford those regular expenses will go a long way to helping you qualify for a business line of credit for bad credit.
To understand your cash flow, nearly every lender will want to see at least three months of your business bank statements.
However, if you have a history of NSFs (non-sufficient funds), you might want to wait a few months before applying for a line of credit. Use that extra time to carefully manage your bank account, making sure it looks 100% lender-friendly.
No matter what, be prepared to talk through your financial history if you know these factors can be found on your credit report.
A bad credit score might create problems when you try to secure funds for your business, but there are still plenty of business lines of credit for bad credit borrowers out there. You just need to understand your needs and limitations and look for options that meet your requirements.
You might get higher rates than other options, but if you really need the cash and don’t qualify for anything else, these options are your best bet.