Small Business Loans For Bad Credit - 500+

How To Get a Business Loan With Bad Credit

The dream of owning a successful business is one that most successful (or potentially successful) business owners are unwilling to give up on. The drive and entrepreneurial spirit is one that is well respected, but they can often lead down paths of failure. Most entrepreneurs are not scared to fail as it’s in the failures that they build their future success. Whether past failures or other circumstances have hindered your credit score, you might be wondering how to get a business loan with bad credit. As with most things you want, you’ll need to start somewhere.

Check your credit score: It can help to start by checking your credit score. Some credit monitoring services can provide suggestions for boosting your credit score or recommend lenders that might be willing to work with you. At the minimum, knowing what your credit score is can help you set realistic expectations. Even though you are pursuing a business loan, the lender will likely place an emphasis on your personal credit score.

Define your needs: Now that you have more realistic expectations, think about what you need the money for and how it will help your business (growth-wise and financially). While it can be tempting to try to over-borrow, at some point, you will need to repay the debt. If you use the funds wisely, the hope is that the loan can put your business and you in a better spot.

Compare offers: The marketplace for business loans, especially those for startups or small businesses, is growing. In an effort to get the best for your business, compare your options. The best way to compare a loan offer is to get pre-qualified. While lenders may advertise rates or loan offers, you need to know what you actually qualify for. At PrimeRates, you can check business loan offers and compare them, thus allowing you to find the right loan in minutes. We can help streamline the loan shopping process without impacting your credit score or stealing your time.

Improve Your Chances of Obtaining a Bad Credit Business Loan

Even if your credit is bad, there are still two things you can do before applying to improve your chances of approval.

Sign with Collateral

If a bank sees you as a high-risk borrower, they may ask you to provide some of your company or personal assets as collateral. This can help your application if the lender believes that there is a high possibility that you may not be able to repay the loan.

One option for this type of funding is invoice financing, in which the lender will advance a certain portion of each unpaid invoice that you might have. If you’re looking for a loan to purchase new materials or machinery, you can also look into equipment financing, where your equipment becomes the collateral for the loan.

Co-Sign

You can also find a co-signer, or a person with better credit and financial standing who is willing to assume responsibility for the loan payments in case the primary borrower defaults on the loan.

Top Options For Business Loans With Bad Credit

There are some hurdles to obtaining a traditional loan for your small business if your credit score is below a 629. However, there are several alternative financing options that might be easier to obtain approval for:

• Short term loans

Short-term loans usually have loan terms between three and 18 months and are paid back on a weekly or daily basis. The downside to these is that they may also come with a much higher rate than a traditional loan.

• Short term lines of credit

Short-term lines of credit typically have higher annual percentage rates than many other financing options and lower credit limits. However, they may offer more funding than a short-term loan can.

• Invoice financing

Using your unpaid invoices as collateral allows the lender to give you advances on a percentage of them for a fee. Once the client repays the invoice, you’ll get the rest of the money back minus the fees charged for the advance.

• Equipment financing

If you’re looking for cash to fund new equipment, you can use your new purchase as the collateral for the loan. In this case, if you can’t repay the loan, the lender will simply take the equipment.

• Merchant cash advances

Merchant cash advances are one of the most expensive forms of financing. With this option, the lender will advance you a specific amount. You’ll then repay the amount, along with the associated fees, from a percentage of your daily credit card sales.

• Business credit cards

Business credit cards can provide you with a small credit line to fund basic expenses. This form of financing can also help you build your business’ credit so that you can eventually access larger lines and cheaper funding.

Best Bad Credit Business Loans

While some lenders have no minimum credit score requirement, many require a minimum score of 500-600. Here are some lenders you can take a look at if your credit falls within this range.

Best for business owners with a credit score of at least 500:

• Kabbage - Kabbage offers loans ranging between $2,000 and $250,000, with APRs starting at 24% with a maximum of 99%. To qualify with this lender, you should have a minimum credit score of 560 and annual revenue of $50,000 or more.

• Fundbox - Fundbox offers lines of credit ranging between $1,000 and $100,000, with APRs starting at 10.1% and going up to 79.8%. This lender does not have a minimum credit score requirement.

• QuarterSpot - QuarterSpot’s loans start at $5,000 with a maximum of $250,000, with APRs ranging between 30% and 70%. They require a minimum credit score of 550 and at least $200,000 in annual revenue.

• OnDeck - OnDeck requires a minimum credit score of 500 for its loans, and a minimum score of 600 for its lines of credit. This lender offers loans between $5,000 and $500,000, with APRs ranging between 9.99% and 99%.

Best for business owners with a credit score of at least 600:

• BlueVine - BlueVine offers lines of credit starting at $5,000, with a maximum of $200,000, and APRs ranging between 15% and 78%. Your business should have at least $120,000 in annual revenue if you’re going for a six-month line of credit or $500,000 for a 12-month line.

• StreetShares - StreetShares offers loans between $2,000 and $250,000, with APRs starting at 24% with a maximum of 99%.

Best for businesses with unpaid customer invoices:

• FundBox - Unlike many of its competitors, FundBox doesn’t have a minimum personal credit score to apply. This lender’s financing ranges between $1,000 and $100,000, with APRs between 16.4% and 76.5%

• BlueVine - If you have a credit score above 530, your business might be eligible for Blue Vine’s invoice factoring service. Their financing starts at $20,000 with a maximum of $5 million and APRs range between 15% and 68%.

What Documents Will I Need To Apply For Bad Credit Business Loans?

If you have already evaluated all of your options based on your finances and credit score, you might be ready to apply for the types of funding that fit your needs. Before you apply, however, you should have the following documents handy:

• Driver’s License

• Voided Business Check

• Bank Statements

• Credit Score

• Business Tax Returns

• Credit Card Processing Statements

What is the minimum credit score for a small business loan?

Credit score requirements can vary by lender and the type of business loan. Most lenders want to see at least a 600 credit score, but this may still be too low for some lenders. Other factors, such as revenue or income and existing debts, can impact qualifications, too.

Can I get a business loan with a 450 credit score?

With a 450 credit score, you might be swinging and missing when it comes to applying for a business loan. Review your credit report and invest time boosting your score. This can increase your chance of approval. If you need money right away, you might want to consider alternative options for borrowing, such as private backers or friends and family members. 

Can my LLC get a loan if my personal credit is bad?

A Limited Liability Company (LLC) offers business owners protection from debts or liabilities. However, when applying for an LLC business loan, the lender can still consider your personal credit score, especially for newer LLC’s. Therefore, LLC or not, getting a business loan with bad credit may be possible but will likely come with some obstacles or drawbacks. With time, an LLC can establish its own credit score, which can be used to take out loans or credit cards in the business name. An LLC ownership is a bit more complex than a sole proprietorship, so you may want to seek professional financial guidance before applying for a loan. 

What is the easiest SBA loan to get approved for?

SBA Express loans are, well, express. The downside of an SBA loan is often the amount of time and energy it takes to get them. SBA Express loans have a faster turnaround time and an SBA guarantee of up to 50%. The SBA loans are funded by third-party lenders, so requirements can vary, but the SBA backing can make it easier for business owners to qualify. It can be a sticky situation, though, as the SBA can be strict since they are backing the loan. 

Can you get a startup business loan with bad credit?

Getting a startup loan with bad credit can make you feel like the forces are against you. First, you are asking a lender to loan money to a business that doesn’t have much time operating, which can mean a greater risk of failure. Second, you are asking a lender to loan a business owner who may have been or is financially irresponsible. It’s important to recognize the position of the lender and apply for a loan that you are comfortable with and able to repay. Some lenders may be willing to help.

Can I get a business loan with a 500 credit score?

If you have bad credit, some lenders might be willing to work with you. However, you might be susceptible to higher interest rates and fees, and lower loan amounts. Therefore, it might be harder to make sense of a business loan. So, what do you do if you have bad credit and need a business loan?

• Improve your credit score: Improving your credit score may help you qualify for a business loan and benefit you long term. Being patient and investing time and energy into boosting your score can be a smart move long term. 
• Apply with a co-signer or co-borrower: Some lenders will allow you to apply with a co-signer or co-borrower. Business owners with a 500 credit score can apply with a joint applicant who has a better or good to excellent credit score to hopefully increase their chance of approval. 
• Back the loan with collateral: Some loans can be backed with collateral, which the lender can seize if the borrower defaults on the loan. This can reduce the risk for the lender and in turn allows them to take a bigger risk on the type of applicant they are willing to approve.

Work with a subprime lender: Some lenders specialize in helping subprime (or bad credit) borrowers. At PrimeRates, we partner with a network of well-known and competitive lending partners. With access to various lenders in one place, you can check offers in minutes at PrimeRates.

» MORE: How To Get a Small Business Loan In 5 Steps