9 Best Small Business Loan for Bad Credit

Last Updated on November 22, 2022 by Selina Parker

If you’re looking for a small business loan and have bad credit, you may feel discouraged. Borrowers with poor credit are considered riskier, so available loans will likely be more expensive.

If you are a business owner with bad credit history, traditional banks, online lenders, or credit unions may hesitate to grant you a company loan. However, this doesn’t mean that you can’t find financing for your business. Luckily, alternative lenders give small business loans to individuals with bad credit ratings.

This blog post will discuss the best small business loans you can get with less than stellar credit. Here are the top alternative small business loans that could help solve your problem.

WHY YOUR CREDIT SCORE MATTERS

Even if you are applying for a small business loan, most lenders will look at your personal credit score. The five C’s of credit are character, capacity, capital, conditions, and collateral.

These elements evaluate how trustworthy you are in repaying your obligations, how many payments you’ve made on time, and your debt-to-income ratio. The most popular credit score model is the FICO score, in which you can evaluate your creditworthiness.

FICO credit score ranges:

• Exceptional: 800-850
• Very Good: 740-799
• Good: 670-739
• Fair: 580-669
• Poor: 300-579

BEST SMALL BUSINESS LOAN FOR BAD CREDIT

1. ONDECK

BEST SHORT-TERM LOAN FOR BAD CREDIT

OnDeck offers a short-term loan to small company owners with less-than-perfect credit who want to grow their businesses.

Maximum loan amount: $250,000

Minimum credit score: 600

Estimated APR: 9.00-99%

Loan Types: lines of credit and terms loan

Best Features

• The minimum credit score required is low
• Same-day funding is available
• It needs lesser paperwork and fast loan approval
• Apply for additional funds after you’ve paid back half of your original loan

Drawbacks

• The fixed-fee structure does not allow you to save interest by early repayment.
• You have to make the repayments on a frequent (daily or weekly) basis
• Requires a personal guarantee

2. FUNDBOX

BEST FOR A BUSINESS LINE OF CREDIT

Fundbox has a business line of credit to address a cash-flow problem, and getting funded is more straightforward than with other lenders.

Maximum loan amount: $150,000

Minimum credit score: 600

Estimated APR: 10.10-79.80%

Best Features

• Simplified application process
• Minimal documentation needed
• Same-day funding is possible
• Accepts businesses with at least six months of operations
• No prepayment penalties, account maintenance costs, or inactivity fees

Drawbacks

• Higher rates compared to traditional banks
• Requires a personal guarantee
• You cannot use it to build business credit
• Requires weekly repayments over a short term (max of 24 weeks)

3. PAYPAL LOANBUILDER

BEST FOR SHORT-TERM LOANS

Paypal LoanBuilder provides fast funding to business owners with long loan terms.

Maximum loan amount: $500,000

Minimum credit score: 550

One-time borrowing fee: 2.9%-18.72%

Best Features

• Low minimum credit score required
• Funds available on the next business day
• Loan terms between 13-52 weeks

Drawbacks

• Businesses must have annual revenue of at least $42,000
• There’s no advantage to paying off the debt early since you pay the whole sum at settlement.
• Not start-up friendly
• Blanket lien and personal guarantee required

4. LENDIO

BEST LINE OF CREDIT

Lendio is a flexible financing option that matches small business owners to 75+ different lenders to secure the funding they need. You aren’t required to utilize all of the money, and you won’t have to pay for the funds you cannot use.

Maximum loan amount: $500,000

Minimum credit score: 560

Interest rate: 10-28%

Best Features

• A low credit score required
• Only pay interest on the funds you use
• Application as fast as 15 minutes

Drawbacks

• Business must have $50,000 annual revenue
• Loan terms for one to two years

5. RAPID FINANCE

BEST FOR LONG-TERM FINANCING

Rapid Finance offers lending solutions to small and medium-sized businesses.

Maximum loan amount: $1 million

Minimum credit score: 500

Monthly fee: 9-31%

Origination fee: 0-2.5%

Loan types: term loans, bridge loans, invoice factoring, lines of factoring, merchant cash advances

Best Features

• Most extended business loan terms up to 60 months
• Reviews the company’s health as a whole rather than just its credit rating
• Get funded within hours after approval.
• The monthly fee is lower if you have a higher credit score

Drawbacks

• Requires daily or weekly repayments
• You pay a monthly payment instead of an APR
• Requires a blanket lien

6. TRITON CAPITAL

BEST FOR AN EQUIPMENT FINANCING

You can secure this type of financing with the equipment you buy, and you’ll have more flexibility in credit requirements since these types of loans.

Maximum loan amount: $250,000

Minimum credit score: 600

Estimated APR: 4.99-25.00%

Best Features

• No prepayment penalty
• Fast funding in one to two business days
• Monthly, quarterly, yearly, or semi-annually are the available payment options

Drawbacks

• Requires personal guarantee and blanket lien
• Requires high annual business revenue

6. SBA MICROLOAN

BEST FOR SBA LOAN FOR BAD CREDIT

Microloans are best for non-profit, community-based organizations that may be more inclined to work with you if your credit is terrible.

Maximum loan amount: $50,000

Minimum credit score: 620

Estimated APR: 8.00-13%

Best Features

• Less strict criteria for eligibility than for other government loans
• Available from nonprofit lenders

Drawbacks

• Requires personal guarantee
• Requires collateral
• Small borrowing capacity

8. BLUEVINE

BEST FOR A BUSINESS LINE OF CREDIT

BlueVine focuses on funding small businesses in need of business lines of credit.

Maximum loan amount: $250,000

Minimum credit score: 600

Estimated APR: 15.00-78.00%

Loan Types: term loans, lines of credit, invoice factoring

Best Features

• Get funded within 12 to 24 hours
• Different terms lengths are available for various financing needs
• Accepts borrowers that are at least six months in business

Drawbacks

• A personal guarantee is required
• Requires weekly repayments
• Higher rates than traditional banks

9. BIZ2CREDIT

BEST FOR A SIGNIFICANT AMOUNT

Maximum loan amount: $5 million

Minimum credit score: 580

Loan Types: merchant cash advance and lines of credit

Best Features

• Large maximum loan amount
• Uses a network of financial institutions to facilitate transactions
• Matches borrower’s need with different loan options
• Offers a diverse selection of loans

Drawbacks

• Functions as a platform rather than a direct lender
• The criteria for a loan might differ

These are the top bad credit business loans you can apply. Each business loan has its unique benefits and drawbacks, so read the fine print before signing anything.

Don’t let your bad credit score keep you from starting or expanding your business. There are options available to you, so don’t hesitate to reach out and see what’s best for your business financing needs. APPLY NOW!