Best Business Loans for Bad Credit in 2020

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Bad credit is a common reason for not being able to get affordable business financing. If you have bad credit, defined as a credit score between 300 and 649, there are actually more options available to you thanks to a fast-growing group of alternative lenders in the financing industry. The best bad credit business loans available to business owners with personal credit below 649 are:

  1. Kabbage
  2. Fundbox
  3. Balboa Capital
  4. PayPal
  5. BlueVine
  6. Capital One Secured Credit Card

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

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

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 649, then you’ll still be able to find a business loan.

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 business loans can definitely wreak havoc on a business’s cash flow. 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 six loan types and lenders offering them.

1. Kabbage

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, have at least one 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.

2. Fundbox

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 that are secured by the invoices themselves. This self-secured nature of invoice financing makes it easier for you to get a 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 three 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.

3. 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 $500,000. Their loans last for a two- to five-year term, and will relatively low interest rates as far as lower-credit financing goes, at 3.99% to 25%.

Balboa Capital is best for:

Business owners with one 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.

4. 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 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.

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

5. BlueVine

BlueVine offers both an invoice factoring product and a line of credit product (called their FlexCredit) for borrowers with lower credit scores.

The invoice factoring product requires a credit score of 530, and the FlexCredit line of credit requires a score of at least 600.

If you have outstanding invoices that are tying up your cash flow, the BlueVine invoice factoring product could be a great funding product for you.

6. Capital One Secured Mastercard

If you have limited or poor credit, then looking toward 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:

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

What Other Criteria Do Lenders Consider Besides Credit?

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.

The Bottom Line

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.

  1. 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.
  2. 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.
  3. 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.
  4. Stay in business. Your time in business is a major factor for business financing eligibility.
  5. 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.

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.

Vice President and Founding Editor at Fundera

Meredith Wood

Meredith Wood is the founding editor of the Fundera Ledger and a vice president at Fundera. She launched the Fundera Ledger in 2014 and has specialized in financial advice for small business owners for almost a decade. Meredith is frequently sought out for her expertise in small business lending. She is a monthly columnist for AllBusiness, and her advice has appeared in the SBA, SCORE, Yahoo, Amex OPEN Forum, Fox Business, American Banker, Small Business Trends, MyCorporation, Small Biz Daily, StartupNation, and more. Email: meredith@fundera.com.
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