6 Best Loan Options for Business Owners with Bad Credit

Everything you need to know to find and apply for business loans when you have bad credit.
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Bad credit is a common reason for not being able to get affordable business financing. But if you have personal credit scores of 629 or less, there’s actually more options available to you thanks to a fast-growing group of alternative lenders in the financing industry.

Now, business loans for bad credit borrowers are available in a variety of shapes, sizes, and structures. The best bad credit business loans available to business owners with personal credit below 629 are:

  1. Quarterspot: Best for short-term loans
  2. Kabbage: Best for short-term lines of credit
  3. Fundbox: Best for invoice financing
  4. Balboa Capital: Best for equipment financing
  5. PayPal: Best for working capital
  6. Capital One Secured Credit Card: Best business credit card for bad credit.

 

This guide breaks down the details on the types of bad credit small business loans available and what you need to know about the lenders offering them.

Check Your Loan Options

Business Loans for Bad Credit: Your 6 Best Options

With such a vibrant industry full of alternative lenders, there are more bad credit business loans to choose from than ever. If you’re working with bad credit below 629, then you’ll still be able to find a business loan.

Be careful, though. Bad credit business loans are very often extremely hard to pay back: With high interest rates, frequent payments, and short repayment terms, bad credit business loans can definitely wreak havoc on a business’s cash flow. So, when looking for these small business loans, it’s crucial to find the most affordable option possible. Even within the following six best bad credit business loans, you can still come across some pretty expensive funding.

Nonetheless, many bad credit business loans offer creative solutions to the risk that a bad credit score poses to business lenders. So, take a look at these top 6 loan types and lenders offering them.

1. Quarterspot: Best for Short-Term Business Loans for Bad Credit

If you’re looking for small business loans for bad credit with a structure you’re more familiar with, short-term loans might be the right choice.

Short-term loans are usually 3 – 18 months in length and get paid back with daily or weekly ACH payments. However, they tend to fall on the expensive side of business financing, with higher APRs. Plus, those more frequent payments can cut into your cash flow.

Fast cash is expensive cash, but sometimes you just need those extra funds, and due to their easy application process, short-term loans for bad credit might be an ideal option.

These bad credit business loans are a potential solution for those with a credit score of over 500. Thanks to short term and daily payments, lenders can take on more risk when choosing their short-term loan borrowers.

If you think you could benefit from a short-term loan, Quarterspot is a short-term lender that is able to work with business owners with personal credit as low as 550. The best part about a Quarterspot loan is that it’s a fully amortizing product—meaning you’re forgiven the remaining interest if you pay off the loan early.

Quarterspot offers a short-term loan product ranging from $5,000 to $250,000 in loan amount, and has factor rates ranging from 1.11 to 1.38.

Quarterspot is best for: 

Business owners with fixed capital needs, at least 1 year in business, and at least a 550 credit score. Quarterspot can fund loans in as fast as 24 hours, so it’s especially good for business owners in need of fast capital.

Learn more about this product in our Quarterspot review, or see if you qualify for Quarterspot here.

2. Kabbage: Best for Short-Term Business Lines of Credit for Bad Credit

Business lines of credit offer quick access to flexible working capital through a revolving credit limit. And business lines of credit with repayment terms of less than eighteen months, often referred to as short-term business lines of credit, are more accessible to business owners with bad credit.

A bad credit business line of credit will have higher APRs and will offer lower credit limits than longer-term business lines of credit. That said, they still offer stellar bad credit business financing, especially relative to more expensive, shorter-term bad credit business loans.

If you think a business line of credit could be right for your business, check out Kabbage. This business line of credit provider only requires you to have a personal credit score of at least 550 to be eligible for their product. Plus, applying for this bad credit business loan option will be as simple as syncing your accounting software to your Kabbage account.

Another major bonus of choosing to fund with Kabbage? This short-term business line of credit comes with monthly payments instead of daily or weekly payments that bad credit business loan remittance schedules typically come with.

Kabbage is best for: 

Business owners who need flexible financing (where you can borrow up to a certain limit and pay interest only on what you borrow), have at least 1 year in business, and $50,000 in annual revenue. Kabbage does not have a personal credit requirement for their short-term line of credit product.

Learn more in our complete Kabbage review, or see if you qualify with Kabbage here.

3. Fundbox: Invoice Financing for Bad Credit

One of the best ways you can offset a bad credit score is by having some form of collateral to offer lenders. But when we say collateral, we don’t mean your house or the family car.

Through invoice financing, lenders allow you to access advances for outstanding invoices which are secured by the invoices them. This self-secured nature of invoice financing makes it easier for you to get that business loan with bad personal credit without having to offer up valuable property.

With invoice financing, lenders can offer you a cash advance equal to around 85% of the outstanding invoice amount. Then, when your customer pays back your invoice, you’ll receive the remaining 15%, minus any fees incurred. Usually, these companies charge a flat fee—often around 3%—to process the transaction, and then charge a fee each week the invoice remains outstanding, often around 1%.

Since invoice financing is backed by invoices, invoice financing providers are typically able to finance loans for business owners with bad credit. There are also some invoice financing providers who don’t even look at credit, so it’s one of the few products on the market that’s truly a small business loan with no credit check.

One invoice financing company on our marketplace—Fundbox—works with borrowers with credit scores starting at 500. Fundbox offers a line of credit product that’s backed by outstanding invoices. They offer line of credit limits up to $100,o00 at rates starting at 4.66% of your draw amount.

Fundbox is best for:

Business owners who need capital and have outstanding invoices they can finance. Fundbox requires a 500 credit score, $25,000 in annual revenue, and 3 months in business (making it an especially good bad credit business loan for startups).

Read more in our complete Fundbox review, or see if you qualify for Fundbox here.

4. Balboa Capital: Equipment Financing for Bad Credit

If you need a business loan to finance an equipment purchase, keep reading. With equipment financing, you can use that equipment you’re looking to buy to collateralize the loan. And again, since there’s collateral backing the loan, your lender will care less about a bad credit score.

Equipment loans basically operate like car loans—you’re advanced the sum you need to purchase the equipment, then pay back the loan, plus fees, over a set period of time.

You fully own the equipment once it’s completely paid off, which can make this a better solution than renting or leasing equipment.

Even though the equipment collateral will make equipment financing less risky for equipment financing companies, equipment financing is, nonetheless, still pretty hard to qualify for with bad credit. This is mostly because of the long repayment terms that equipment financing tends to come with. Nonetheless, this option still qualifies as a top bad credit business loan because business owners with personal credit as low as 600 can still qualify.

Balboa Capital is an equipment and working capital financing product offering equipment financing of up to $500,000. Their loans last for a 2 to 5 year term, and will relatively low interest rates as far as lower-credit financing goes, at 3.99% – 25%.

Balboa Capital is best for:

Business owners with 1 year in business, at least a 600 credit score, and $100,000 in annual revenue.

Read our complete Balboa Capital review, or see if you qualify for equipment financing here.

5. PayPal Working Capital: Bad Credit Working Capital Options

A working capital loan is structured similar to a short-term loan, where you borrow a lump sum amount of money to finance your company’s everyday operations. These loans aren’t used for bigger investments into your business.

If you just need capital to smooth out your cash flow, finance payroll, or any regular operations of your business, a working capital loan could be a good fit.

Working capital loans can be options for borrowers with bad credit.

PayPal’s working capital product, for instance, doesn’t even take personal credit into account. You’ll need to be PayPal account holder, of course. But after that, the loan you secure from PayPal is based on the volume of sales you do on PayPal.

PayPal working capital loans are repaid, plus a fee, with 10% to 30% of your business’s daily PayPal sales. Borrowers can qualify for up to 30% of their annual PayPal sales with a maximum of $97,000 for the first loan.

PayPal is best for:

Borrowers with a business or premium PayPal account opened for at least 3 months, and do a minimum of $15,000 in annual PayPal sales.

Learn more in our PayPal Working Capital review, or see if you qualify for PayPal here.

6. Capital One Secured Mastercard: Business Credit Cards for Bad Credit

If you have limited or poor credit, then looking towards business credit cards can be a smart move.

A business credit card—either on its own or coupled with a business loan—can give you easier access to a small amount of spending power (in the form of a credit line) that you can use to cover your business’s expenses.

Perhaps most importantly, a business credit card will also help you build your credit so you can graduate to better business credit cards and business loan options down the line.

Use a credit card responsibly (never taking on too much debt, and paying in full and on time every month), and the credit reporting bureaus will notice your good behavior.

When it comes down to it, every business owner should have a business credit card in their wallet. Here is your best option:

Capital One® Secured Mastercard®
Building Credit

Capital One® Secured Mastercard®

Apply now
on Capital One’s secure website
  • Builds personal credit, which will help get a business loan in time
  • Flexible security deposit
  • No annual fee
Learn More
Welcome Offer
None
Rewards Rate
Annual Fee
$0
Minimum Credit
450+
Rates, Fees & Further Details

The Capital One Secured Mastercard is a great option for borrowers with poor credit or no credit at all.

This is a secured card, so your ability to get the card depends on your ability to put a cash deposit down for it.

Secured cards are great options for business owners with struggling credit: With the security of a cash deposit, issuers are more willing to work with you despite where your personal credit score stands. In the case that you can’t pay your secured business credit card debt, they can simply seize the deposit to recoup their losses.

The Capital One Secured Card is an especially great option for those borrowers that don’t want to put down a ton of cash in the form of collateral: A deposit of $49, $99, or $200 (depending on your credit history) gets you a credit limit of $200.

Learn more about the Secured Mastercard

Summary of Bad Credit Business Loans Available

LenderType of LoanCredit Score RequiredOther Requirements
Quarterspot
Short-Term Loan
550
$200,000 in annual revenue; 1 year in business
Kabbage
Short-Term Line of Credit
No minimum
$50,000 in annual revenue; 1 year in business
Fundbox
Invoice Financing
500
$25,000 in annual revenue; 3 months in business
Balboa Capital
Equipment Financing
600
$100,000 in annual revenue; 1 year in business
PayPal
Working Capital
No minimum
Have a PayPal business or premium account, and a minimum of $15,000 in annual PayPal sales
Check Your Loan Options

Understanding the “Credit” In Bad Credit Small Business Loans

Looking for business financing can get complicated—fast. It can feel daunting, or even impossible—especially when you’re looking for business loans with bad credit.

One of the most important things to note when you’re looking for bad credit small business loans is that when we’re talking about bad credit, we are talking about bad personal credit.

It’s true: your personal credit score is actually a crucial part of the business loan application. In most cases, the only lenders looking at your business credit will be banks.

Instead, online lenders will focus on your personal credit score. Generally speaking, when we refer to credit—even within the context of business loans—we’re referring to personal credit scores.

So that “credit” in business loans for bad credit is really just your personal credit history, even if we are talking about business loans.


Business Loans Options, Broken Down by Credit Score Minimums

Based on your personal credit score, do you have a chance of qualifying for a business loan?

That’s a tough question to answer—unfortunately, lending isn’t so cut-and-dry.

Especially when it comes to getting a business loan with bad credit, many different factors contribute to your “fundability.” Just because your credit score puts you in the threshold of certain lenders or kinds of loans, that doesn’t mean you’re guaranteed to find the funding you want. The best way to know if you can get bad credit business loans for sure is simply to apply.

That being said, there are some general benchmarks you should be aware of while you’re looking for small business loans with bad credit:

Paper sheet
700+

If you have a credit score over 700, you’re in a good position to qualify with most lenders—including banks and the SBA.

Paper sheet
650+

If you have a credit score over 650, you might be able to qualify for a Small Business Administration loan.

Paper sheet
620+

If you have a credit score over 620, you could qualify for a medium-term loan.

Paper sheet
550+

If you have a credit score between 550 and 620, you could qualify for a short-term loan… And potentially a medium-term loan if your business is in a good financial position. (These business loans for bad credit are an excellent option for you.)

Paper sheet
500+

If you have a credit score between 500 and 550, you’ll have trouble qualifying for some kinds of loans. But if your business is doing very well, your low credit score might get canceled out by some other financials.

Paper sheet
500 and below

If you have a credit score under 500, you’ll have a very hard time qualifying for most loans. Again, if your business is doing extremely well, that might help open a few doors.


Bad Credit Business Loans: What Else Do Lenders Look At?

What other parts of your business will matter to a lender?

The better you understand the application process attached to business loans for bad credit, the better your chances are of qualifying for the financing you need.

And remember: even if you’re looking for business loans with bad credit, other strong factors could help open up your funding options.

1. Annual Revenue

One of the most important parts of your loan application is your business’s annual revenue.

The more revenue you’re bringing in, the better.

That should come as no surprise. A high revenue proves to lenders that you know what you’re doing—and that your business is a worthwhile investment for them to make.

Especially when dealing with small business loans for bad credit, lenders want to make sure that you’ll be able to repay their loans, and a good annual revenue can help put that fear to rest.

Plus, your annual revenue can also help set expectations for your loan size—generally speaking, the loan you’ll qualify for will be around 8 – 12% of your annual revenue.

2. Profitability

Along with revenue, lenders will also want to know whether or not your business is profitable.

While your business doesn’t have to be profitable in order to qualify with plenty of online lenders, it will help your chances if you are—especially if you’re looking for business loans for bad credit.

3. Current Debt Obligation

While underwriting for bad credit business loans, lenders want to know who else you’ve been working with.

If you’re currently paying back a small business loan, you might have trouble qualifying for a second product.

Most lenders don’t want to take what’s called “second position” to another lender, because if you already have a business loan, it’s very likely that your original lender put a UCC lien on your business.

For some lenders, taking second position isn’t an issue. Maybe they’re just confident enough in your financials or history, or they’re giving you capital to refinance the debt you already have.

For other lenders, if you’ve almost entirely repaid your debt, then it won’t be a problem. It depends on their risk tolerance: how much are they willing to bet on your business?

4. Cash Flow

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 financing, especially with business loans for bad credit.

To understand your cash flow, nearly every lender will want to see at least three months of your business bank statements.

And depending on the kind of financing you’re looking for, they might ask for more.

Plus, if you have a history of NSFs, you might want to wait a few months before applying for bad credit small business loans. Use that extra time to carefully manage your bank account, making sure it looks 100% lender-friendly.

5. Past History

Past history is pretty vague, but it’s the best way to sum up what lenders look for when they pull your credit report.

If a lender does a “hard pull” and wants to look at a physical credit report, it’s because they want to know what has happened in your financial past.

What else do lenders care about on your credit report, other than the one number that is your credit score?

Here are a few examples…

Have you had a bankruptcy?

If so, you’re not necessarily disqualified, but most lenders will want you to be a few years out from bankruptcy before deeming you eligible for another business loan.

Have you had a foreclosure? Do you have a tax lien on your business? Are there any other red flags on the report?

If you have a potential red flag on your report, don’t fret. These aren’t the end of the world—especially for lenders offering small business loans for bad credit borrowers.


Graduating Beyond Bad Credit Business Loans

If you want to graduate to a lower-cost product than a bad credit business loan, you need to be a responsible borrower.

Here are some things you must accomplish in order to graduate from bad credit business loans to better, more affordable financing.

Step 1: Pay on Time

This is the most important step.

Not only will this build a good relationship with that lender, but these on-time payments will have an enormous effect on improving your credit score.

Step 2: Build Up Your Total Bank Balance

Like we said earlier, your average bank balance is something almost every lender will care about.

If your goal is a lower-cost loan, it’s important to spend some time padding up your bank balance and making sure you don’t have overdrafts.

Step 3: Monitor Your Credit Score

Don’t just assume your credit score is approving—make sure of it.

By signing up for a free credit monitoring service like Credit Karma, you can make sure your score starts crawling up.

Even better, Credit Karma breaks down exactly where your score needs help, so you’ll walk away with other tips to get your score up.

Especially if you’re looking for small business loans with bad credit, you can’t miss this step.

Step 4: Stay In Business

This one might seem obvious, but it matters a whole lot.

The longer you’re in business, the better loan options you’ll have. Your time in business is a major factor for business financing eligibility.

In fact, if nothing else changed about your loan application except your time in business, that alone could unlock a few new loan options.

Step 5: Continue to Be a Good Business Owner

These are just a few ways you can prepare yourself for a better small business financing option next time around.

Of course, there are other things you can focus on, like building your revenue or becoming profitable…

But chances are, as a savvy business owner, those are always at the top of your list.


Bad Credit Business Loans: The Bottom Line

Now that you’ve made it through our comprehensive guide to finding a small business loan with bad credit, what are your next moves?

Though it might be more expensive than options open to business owners with excellent credit, debt in the form of bad credit business loans can act as a terrific stepping stone to more affordable small business funding options—if you remain on-time and diligent with repaying it. If not, bad credit business loans could trap you in a cycle of expensive debt and worsening credit.

Ensure that you can afford to repay whatever small business loan you take on—and your on-time repayments toward your small business loans will help you level up to even more affordable long-term business financing.