Business Loans for Bad Credit: Your Complete Guide

Yes, you can get a business loan with bad credit. Here's exactly which lenders accept low credit scores and how to improve your approval odds.

Best Options for Credit Scores 550-600

1. SBA Microloans

Min score: 580 | Amount: Up to $50,000 | Best for startups

2. Merchant Cash Advances

Min score: 500 | Amount: $5,000-$500,000 | Fast funding (1-3 days)

3. Invoice Financing

Min score: 550 | Amount: Based on invoices | No collateral needed

4. Equipment Financing

Min score: 580 | Amount: Up to equipment value | Equipment is collateral

Options for Credit Scores 600-640

1. SBA 7(a) Small Loans (under $350K)

Min score: 640 | Amount: Up to $350,000 | Lower rates than alternatives

2. Online Term Loans

Min score: 600 | Amount: $25,000-$500,000 | Faster approval than banks

3. Business Lines of Credit

Min score: 620 | Amount: $10,000-$250,000 | Revolving credit

Can I Get a Business Loan with a 500 Credit Score?

Yes, but your options are limited. With a 500-580 credit score, you'll typically qualify for:

  • Merchant Cash Advances: Accept scores as low as 500, but rates are very high (40-70% APR equivalent)
  • Short-term online loans: Some fintech lenders accept 550+ with strong revenue
  • Invoice factoring: Based on customer creditworthiness, not yours
  • Secured loans: Using business or personal assets as collateral

Important: These options have higher costs. If possible, spend 3-6 months improving your credit to access better rates.

What's Considered "Bad Credit" for Business Loans?

Credit Score RangeClassificationLoan Options
750+ExcellentAll options, best rates
700-749GoodMost loans, competitive rates
650-699FairLimited options, higher rates
600-649PoorAlternative lenders only
Below 600BadVery limited, expensive

How to Improve Your Approval Odds with Bad Credit

1. Focus on Revenue & Cash Flow

Many alternative lenders prioritize revenue over credit score. If you have:

  • $10,000+ monthly revenue = Merchant cash advance eligible
  • $25,000+ monthly revenue = Online term loan possible
  • $50,000+ annual revenue = SBA Microloan consideration

2. Provide Collateral

Secured loans use assets as collateral, reducing lender risk:

  • Equipment financing (equipment is collateral)
  • Invoice financing (invoices are collateral)
  • Business property loans (real estate collateral)
  • Personal assets (home equity, investment accounts)

3. Get a Co-Signer

A co-signer with good credit can significantly improve approval odds. The co-signer:

  • Must have credit score 680+
  • Becomes equally responsible for repayment
  • Can be a business partner, family member, or investor

4. Consider Revenue-Based Financing

These lenders focus on monthly revenue rather than credit:

  • Repayment is a percentage of daily sales (5-20%)
  • Payments adjust with revenue fluctuations
  • Faster approval than traditional loans
  • Higher cost but more flexible

Steps to Improve Your Credit Score

If you have time before applying, improving your credit score can save thousands in interest:

  1. Pay all bills on time: Payment history is 35% of your score (biggest factor)
  2. Pay down credit card balances: Get utilization below 30% (ideally under 10%)
  3. Don't close old credit cards: Credit history length matters
  4. Dispute credit report errors: 1 in 4 reports contain errors
  5. Become an authorized user: On someone's good credit card
  6. Keep credit inquiries low: Too many applications hurt your score

Timeline: You can improve your score 50-100 points in 3-6 months with consistent effort.

Red Flags to Avoid

Watch Out For:

  • ❌ "Guaranteed approval" claims: No legitimate lender guarantees approval
  • ❌ Upfront fees: Reputable lenders don't charge before funding
  • ❌ No credit check: Legitimate lenders always check credit
  • ❌ Pressure tactics: "Apply now or lose this rate" is a red flag
  • ❌ Unsecured lender: Check if they're registered and licensed

Frequently Asked Questions

Can I get an SBA loan with bad credit?

SBA Microloans accept credit scores as low as 580. However, standard SBA 7(a) loanstypically require 680+ (some lenders accept 640+ for small loans under $350K).

What's the easiest business loan to get with bad credit?

Merchant Cash Advances are the easiest to qualify for (accept 500+ credit scores) but have the highest costs. Invoice financing is also relatively easy since it's based on your customers' creditworthiness rather than yours.

Do I need to put down a deposit for a bad credit business loan?

Some lenders require a 10-20% down payment for borrowers with credit scores below 600. This reduces their risk and can improve your approval odds.

Will applying for a business loan hurt my credit score?

A hard inquiry (when you formally apply) may lower your score by 5-10 points temporarily. However, multiple inquiries within 14-45 days for the same purpose usually count as one inquiry. Use pre-qualification tools when possible—they use soft inquiries that don't affect your score.

Check Your Eligibility for Bad Credit Loans

See which loans you qualify for based on your credit score, revenue, and business profile. No credit check required.

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