Best Bad Credit Business Loans

Last updated Jan. 24, 2023
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Bad credit is a common reason for not being able to get a small business loan. However, if you have bad credit—a personal credit score between 300 and 649—there are options available to you thanks to a fast-growing group of alternative lenders in the financing industry. 
This guide breaks down the details on the available small business loans if you have bad credit and what you need to know about the lenders offering them.

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Business Loans for Bad Credit: Your 4 Best Options

Lender
Type of Loan
Credit Score Required
Other Requirements
Fundbox
Business line of credit
600
$30,000 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; minimum of $15,000 in annual PayPal sales
Capital One
Business Credit Card
Not specified
Cash deposit of $49, $99, or $299 (depending on your credit score) for a $200 credit limit

Best Bad Credit Business Loans

Let’s take a look at the top loan types for bad credit business owners and the lenders offering them.

1. Fundbox

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 Fundbox. This business line of credit only requires you to have a personal credit score of at least 600. Plus, applying for this bad credit business loan option can be as simple as syncing your accounting software to your Fundbox account.
Another bonus of choosing to fund with Fundbox? If you have unpaid invoices, you can draw from your line of credit based on those amounts. This is a variation of invoice financing, which we’ll discuss next, and can be a good option if you’re a B2B business waiting for customers to pay you.
Fundbox is best for:
Business owners who need flexible financing, have at least three months in business, earn $100,000 in annual revenue, and have a credit score of at least 600.

2. Balboa Capital

With equipment financing, you can use the 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, meaning 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 paid off, which can make this a better solution than renting or leasing equipment.
Even though the equipment collateral will make this financing less risky for equipment financing companies, it is 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 provider offering equipment financing of up to $250,000 with terms from two to six years.
Balboa Capital is best for:
Business owners with one year in business, at least a 600 credit score, and $100,000 in annual revenue.

3. PayPal Working Capital

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 in your business.
If you 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 will need to be a PayPal account holder though. 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 three months and who do a minimum of $15,000 in annual PayPal sales.

4. Capital One Secured Mastercard

When it comes down to it, every business owner should have a business credit card in their wallet. If you have limited or poor credit, a secured business credit card can help you build your credit so you can graduate to better business loan options down the line.
Secured cards require a cash deposit, which makes them a great option 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 balance, the provider can simply seize the deposit to recoup their losses.
However, if you use a secured credit card responsibly (never taking on too much debt, and paying in full and on time every month), the credit reporting bureaus will notice your good behavior and your score may grow.
If you have bad credit or no credit at all, the Capital One Secured Mastercard is a great option—especially if you 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.

Can You Get a Business Loan With Bad Credit?

You can get a business loan even if you have a credit score below 649. With such a vibrant industry full of alternative lenders, there are more bad credit business loans to choose from than ever.
Be careful, though. Bad credit business loans are often extremely hard to pay back. They can have high interest rates, frequent payments, and short repayment terms, so bad credit small business loans can definitely wreak havoc on a business’s cash flow. When looking for these loans, it’s crucial to find the most affordable option possible. Even within the following 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.

How to Qualify for a Business Loan With Bad Credit

If you want to qualify for a business loan with bad credit, your business will likely need other strong factors to impress a lender. The better you understand the following criteria and the application process attached to business loans for bad credit, the better your chances are of qualifying for the financing you need.
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% to 12% of your annual revenue.
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.
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?
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.
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.

Ways to Improve Your Credit

If you can only qualify for bad credit business loans, your goal should be to eventually graduate to a lower-cost product. Here are some things that can help you accomplish this:
Pay on time. 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.
Build up your total bank balance. If your goal is a lower-cost loan, it’s important to spend some time padding your bank balance and making sure you don’t have overdrafts.
Monitor your credit score. By signing up for a free credit monitoring service like Credit Karma, you can make sure your score starts crawling up.
Stay in business. Your time in business is a major factor for business financing eligibility.
Continue to be a good business owner. The longer you remain in good standing as a business owner, the better your chances of qualifying for better financing.

Fundera Can Help

Bad credit doesn’t have to stop you from qualifying for a small business loan. However, bad credit business loans can be expensive. Let us help you find the most affordable business loan you qualify for.

How much do you need?

See Loan Options

No cost to you

Your credit score won't be impacted

Compare multiple lenders with one application