Business Loans For Startups With Bad Credit

Business Loans For Startups With Bad Credit

Business Loans For Startups With Bad Credit

Finding a startup business loan can be challenging. And if your credit isn’t great, it will be that much harder. Many lenders that make small business loans often check personal credit,  especially for startup business loans. If you don’t have the required minimum credit scores, trying to find a lender who will let you borrow money for a new business with bad credit can be a frustrating process. 

Don’t give up yet, though. There are a few strategies and funding options worth exploring.

The Guaranteed Approval Myth

If you have bad credit and you’re searching for financing, ads like “startup business loans for bad credit guaranteed” and “no credit check loans” can be very appealing. 

Could an easy approval startup business loan be the solution to get your business off the ground?

Not so fast. You should exercise extreme caution before you apply for any financing options that sound too good to be true.

Here’s the truth. When it comes to financing, there’s no such thing as guaranteed approval for startup loans for bad credit.

Before you start to feel panicked, poor personal or business credit scores don’t mean it will be impossible to qualify for financing for your business. However, any promise of guaranteed approval should put you on guard.At best, promises of guaranteed approval for bad credit business loans may be a sign that you’re dealing with a predatory lender. At worst, the advertising you’re seeing might be a scam.

Can You Get a Startup Business Loan if Your Personal Credit is Bad?

Now that we’ve got those warnings out of the way there are a few options for working capital loans and other financing options if you’re an entrepreneur trying to start a business with bad credit. 

We’re going to be honest with you. It’s not easy to get a business loan if you’re starting a business and you have bad credit. 

Most financial institutions and business financing sources look at one or more of the following factors when considering whether they will make a business loan:

Time in business. Financial institutions consider startup loans to be high risk. The fact is many businesses don’t make it past a year or two, and some lenders will only work with small businesses that have been established for that time frame or longer.

Credit. Lenders often look at how you or your business has repaid loans in the past to help them predict whether you’ll pay it back in the future. (Think about it. If a friend wants to borrow money, you want to know that he or she generally pays their bills on time, right?) They may check personal credit, business credit or both.
Revenues: The lender wants to know you have enough income and cash flow to make periodic payments on the new financing.

If you have bad credit, a brand new business, and no revenues, the lender has no way to ensure you’re going to pay back the debt. Even startups with good credit can have a tough time getting a business loan. Business credit cards are a popular type of startup funding, for example, but they require good credit scores. 

But there are a few options to consider when you are in the startup stage or in the early years of your business, and we’ll cover them here.

What Credit Score is Needed to Get a Startup Business Loan?

Traditional banks typically require high credit scores of at least 680 or more. SBA guaranteed loans generally require acceptable credit, which for most lenders means FICO scores of at least 640 or above. 

There are small business lenders that don’t check personal credit, or that may permit credit scores of 500-600. But they usually lend based on documented business revenues.

What is Considered a Bad Credit Score?

Each lender decides for itself what range for what it deems Excellent, Good, Fair and Poor. However, there are some typical guidelines. FICO and VantageScore credit scores range from 300 to 850. Generally, anything in the 500s will be considered Poor.

Most small business lenders that check personal credit prefer credit scores of at least 650 and some have minimum credit score requirements of 680—700 or above. 

However, some of the lenders we discuss in this article don’t check personal credit, or have more lenient credit requirements.

Types of Business Loans for Startups with Bad Credit

Although guaranteed approval for bad credit isn’t a real thing, there are lenders that work with small business owners with bad personal credit scores or weak business credit history. Whether your personal credit is in bad shape or your business credit rating leaves a bit to be desired, there may still be viable options available to borrow money for your business so you can free up cash flow.

Before we break down some of the options available, keep in mind that bad credit financing represents a higher risk to the lender. As such, these financing options often feature higher interest rates and less attractive terms than you might expect with traditional business financing.

The same is true for a small business startup loan. Lenders prefer a track record of at least a year or two in business making a startup loan problematic.

Here are several financing options you might want to consider if you need to borrow money with bad credit scores.

1. Hard Money Lenders

These private lenders are interested in lending money for a higher return. While they are popular for real estate investing loans, they may make loans for a variety of businesses such as laundromats or nail salons. Many don’t advertise, and you may need to find them by networking with other entrepreneurs. Terms will be expensive, so you need to make sure you can make money after you’ve paid the cost of the loan.

Secure funding for your business, even with low credit scores.

2. Vendor Terms

With this type of financing, your suppliers allow you to buy items you need for your business (anything from food for a restaurant, to concrete for a builder, to copy paper for a notary business) and pay for it on terms such as net-15 or net-30 or longer. Net-30 terms means payment is due 30 days after the invoice date. While you won’t get a lump sum of cash this way, you will have more time to pay which can help improve cash flow.

Even better, many vendors don’t check personal credit. And some report to business credit, which means if you pay on time you can help establish business credit.

Find a list of easy approval net-30 vendors here.

3. Online Business Lenders

With poor credit, your chances of walking into traditional banks or credit unions and convincing someone to approve your loan application are pretty slim. A short-term loan from an alternative lender online who might be willing to work with your situation if you have less-than-perfect credit may be much easier to get than traditional loans. 

A small business line of credit or loan from an online lender could be a much more realistic option—and has become the first-choice financing option for many businesses today.

In spite of a poor credit rating, your business may be able to get a business line of credit or other type of online loan, but it is likely going to have to prove it has sufficient income to repay the loan. The lender will likely require you meet average monthly revenue (or annual revenue) requirements, and prove it via business bank statements or other documentation. 

Keep in mind, subprime loan options from online lenders may come at a cost—including higher APRs, costly fees, shorter (or more frequent) payback timetables, collateral, and personal guarantees. And even if the lender’s credit requirements are more lenient, you’ll still likely need to prove your ability to repay the loan.

4. Invoice Factoring

Invoice factoring or invoice financing is another option available to businesses that invoice other businesses (B2B). Factors (the companies that provide this type of funding) are more interested in the credit profile of your customers than yours, so they will often work with businesses that have a less-than-stellar credit history. There are many online factoring companies that make it easier and more accessible to factor invoices than it was in the past.

Factoring isn’t really a loan. In a nutshell, you are selling your unpaid invoices to a third party (a factor) at a discount. The factor will pay you a percentage (usually around 85%) of the agreed-upon amount today and will pay the balance, minus a percentage, once your customer has paid the invoice.

There are some factors that will allow you to continue to collect from your customers, but you should expect that the factor will insist on handling that. This might not be a small business loan in the traditional sense, but it is a way to leverage the value of your accounts receivable today rather than waiting for your customers to pay their invoices. This is a very popular way to finance businesses in the manufacturing, construction and textile industries, for example.

5. Business Cash Advance

A business cash advance or merchant cash advance is an option for businesses making money (usually at least $5000 to $10,000 a month or more). Rather than a loan, this is an advance on future sales, and looks at revenues, not your credit scores, to qualify your business. 

Cost is based on a factor rate, not an interest rate, and businesses that qualify may get approved and funded in as little as a business day.

6. Microloans

New businesses can also consider microloans. These are often made by non-profit lenders – CDFIs – who work with underserved borrowers and they may be more flexible with credit standards.

There is also an SBA microloan program, though these loans are made by individual lenders and not the US Small Business Administration. In addition, options like Kiva offer 0%, no fee microloans to small businesses. These may be easier to qualify for than traditional loan products.

Read: CDFI Fund and CDFIs: Everything Small Business Owners Need to Know

7. Equipment Financing

Another of your funding options is equipment financing, which can be helpful if you need to purchase equipment like computers, vehicles, or machinery for your business. Because the equipment you’re buying acts as your collateral, you may be able to get great rates even with lower credit scores, though requirements do vary.

8. Crowdfunding

If you can’t qualify for traditional or alternative, or first-time bank loans or you’re unwilling to pay the higher financing costs associated with such loans, crowdfunding might offer you a non-traditional way to access the business capital you need.

There are three primary types of crowdfunding options for businesses:

Equity crowdfunding has several flavors, but generally involves offering investment shares (equity) to in your company to investors in exchange for capital. You’re giving up some ownership in your company in exchange for the investment. Businesses can raise up to $5 million annually this way.

Reward crowdfunding involves reaching out to your customer base (or prospective customer base) directly and convincing them to make small investments in your business. In exchange, you will typically give these customers a reward, such as the opportunity to be one of the first to receive your company’s new product or service once it launches.

Debt crowdfunding provides a loan you will repay. There aren’t a lot of these platforms, but Kiva is one popular example that allows you to crowdfund and borrow up to $15,000.

While online platforms like Kickstarter and Indiegogo are the most well-known, there are dozens of crowdfunding platforms that can help you to launch and manage a crowdfunding campaign for your business. 

Read: This 0% Interest Small Business Loan Just Got Better

On the negative side, crowdfunding doesn’t always work and it’s far from a guaranteed source of financing. Many business owners who launch crowdfunding campaigns fail to meet their funding goals. With some crowdfunding platforms, if you don’t reach your funding goal you may forfeit the money that did come in for your campaign.

But when crowdfunding does work, it can be a big financial win for your business.

9. Small Business Credit Cards

Small business credit cards are very popular for startup funding because they generally don’t require extensive time in business or business revenues. However, most do check personal credit as you’ll typically have to sign a personal guarantee to open an account. Most issuers require a minimum personal credit score of 650 to 680 or higher. For that reason there aren’t a lot of business credit cards for bad credit.

One option: a secured business credit card. A secured credit card requires a security deposit but typically features more lenient approval requirements in exchange. Provided you manage the account well, a secured business credit card could help you build better credit for the future, making it possible to apply for more traditional business funding down the road.

While the rate on a secured business card may be higher, the good news is you can avoid credit card interest altogether as long as you pay your balance in full each month by the statement due date. This is a credit-building strategy you can use with all business credit cards.

Alternatives for Bad Credit Borrowers

Here are a few other options to consider for finding the small business financing you need:

Friends and Family 

This is one of the most popular types of startup funding, and good credit is not required. If you are going to go this route and have identified people who will support your business, an alternative may be to ask them to back a crowdfunding campaign. You may be able to attract other lenders or investors as well.

Retirement Funds

You may be able to use your retirement funds to seed your startup, either by borrowing against a 401(k), cashing in part of your IRA or 401(k) or rolling funds into a ROBS account which then funds the business. All of these options are risky and you should not consider them without first getting professional to determine the potential tax implications.

Personal Loans

While personal loans are sometimes used to start a small business, you’ll probably have difficulty qualifying if you have poor personal credit.

Small Business Grants

Another way to get capital that doesn’t have to be paid back is with small business grants. While these can be tough to get (they often have lots of competition), you may be able to get $1,000 to $50,000 or more you can put toward growing your business.


You may need to start small, and find a market for what you’re selling, then use revenues from those sales to expand your business. To make this successful, you’ll want to take the most efficient route possible. Get free help from your SBA Resource partners— SCORE, Small Business Development Centers, and Women’s Business Centers— to give your business the best chance of success. Find local SBA resource partners here.

Struggling with bad credit but need startup funding? Nav’s blog offers expert advice to help you secure financing with ease.

How to Choose the Right Financing Option for Your Startup

So many options…so little time. How can you narrow down your options to the financing that’s the best fit?

Start by knowing what you qualify for. If your business is less than two years old and you don’t have good credit, you won’t likely get traditional bank loans or SBA loans, for example.

How’s your credit? That will also determine what you’re eligible for.

Do a little research to see what sort of rates you could get, then decide if that interest rate is worth paying. What do you plan to use the loan for? How quickly can it see a return on investment?

What Does it Take to Qualify for a Startup Business Loan?

Bank loans often require good credit scores in addition to other factors— some lenders may consider other criteria, such as revenues.

Checking your credit with major credit bureaus like Experian, Equifax and Transunion will let you know in advance what lenders may see when they request your credit reports or scores.

It’s a good idea to read the eligibility requirements, terms, conditions, and any other fine print before you fill out funding applications for your business. Make sure you understand the interest rate, the repayment term, whether or not they are going to want collateral, or if this will otherwise be a secured loan. This is a good rule of thumb no matter what the condition of your credit may be. More about start up business loans here. 

Each loan program is different in what it considers to determine creditworthiness, but lenders that cater to businesses that have low credit scores often look beyond credit score requirements to things like annual revenue, personal finances, and personal assets.

Most business loans don’t require a business plan but it’s still a good idea to have one to help you understand how much you need to borrow and how you’ll use those funds to make money.

How to Get a Business Loan with Bad Credit

Again, business lenders usually look at three main criteria:

  • Credit (personal credit and sometimes business credit) 
  • Time in business (1-2 years preferred) and
  • Business revenues and/or cash flow

If any of these criteria are weak in your profile, the others should be strong. 

Before you begin the application process, review the details of the loan offer so you understand the lender’s requirements, and you have everything you need and can streamline the process.

You’ll be asked questions about your business, including:

  • How long it’s been in operation
  • Its location
  • Its industry
  • Annual revenues

You may also be asked for personal information like your Social Security number and contact information. You’ll also need to provide your business bank account details so funds can be deposited into your account once your application is approved.

What to Consider When Applying for a Startup Business Loan with Bad Credit

Borrowing money when you have bad credit is a highly-individualized decision. Because the cost of financing when you don’t qualify for low-interest loans can be exorbitant. Only you can determine whether that high cost is worthwhile.

If, for example, you need money now but know you can repay it in six months, a high-interest loan may not be a big deal, since you can pay it off before you’ve accrued too much in interest. 

If the cost of financing is more than you can stomach, consider building your credit and applying for a loan later when your scores are improved.

Looking for the best small business loan? We’ve got you covered. Get funding options tailored to your unique business needs.

Do You Need Collateral to Get a Startup Business Loan?

Some small business loans require collateral, regardless of credit. If you run a new business or don’t have great credit, traditional lenders will prefer you to have collateral.

What can serve as collateral for a business loan? Things like equipment and real estate are a few examples. But invoices and receivables can also serve as collateral.

Personal home equity may be used as collateral for some loans and some lenders will accept a personal guarantee in place of collateral.

How to Build Business Credit to Get a Startup Business Loan

There’s no question that good credit scores – both business and personal – can help you to qualify for better business financing options. Good credit not only opens doors when it comes to financing, but it can also help you to secure loans and business credit cards at a lower cost.

Looking to build your business credit? If your business credit isn’t where it needs to be, here’s a helpful guide you can use to improve your business credit in five steps.

Remember, it’s also wise to keep a close eye on both your personal and business credit reports and scores. You can monitor your business and personal credit in one spot with Nav.

Good business credit is a crucial key to help you unlock better financing options for your business to get the working capital you need. Lenders will care about the condition of your credit, so you should care about it as well.

FAQs About Startup Loans for Bad Credit

This article was originally written on May 16, 2019 and updated on May 1, 2023.

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27 responses to “Business Loans For Startups With Bad Credit

  1. hi I have a small business but I don’t have the finance to buy equipment to get the business running, all I need is to purchase a truck

  2. Cheers
    Very good day I hope you are well

    Register a company in Florida called Atlantic1000 Financial Group which is a corporation dedicated to acquiring banks and financial companies outside the United States for potential.

    Many fascinating ideas and an excellent business plan, I just need a loan to start this fabulous project.

    I would like to know if there is any possibility of obtaining a loan with you to start this project.

    Thank you very much in advance, I await your prompt reply.

    1. I’m trying to restart my business 40000 start up will purchase and get me started enough to continue my business with no issues my personal credit got in the way due to medial issues and covid 19 issues / divorce. Who can help me maverik?????

  3. I am still trying to find a start-up business loan. I have bad to OK credit. Can you help me? The only reason that I am asking is that I have looked everywhere, and I have noticed a couple of things. First of all, companies that say they can help me, really can’t. For instance, a number of the companies that you have listed that say they have start-up business loans, really don’t offer them. Can you really help me or our just going to give the standard line? The reason why this email sounds like this is that I am just very frustrated by sites like this that they can help, but really can’t. I believe in truth in advertising.

  4. I am currently employed in a corporate salon as the salon lead. We are closed because of current events. I may have the opportunity to be the owner of this salon. But won’t have a definitive answer until I have clarity as whether or not the corporation can reopen and/or is the current property manager can break their lease. There are 12 employees, 14 stations, and a gross annual revenue of approximately $500,000.00.
    Should this work in our favor I will need to apply for funding to cover start up expenses. Can or should I start the process of securing funding this soon?

  5. I have bad credit from past alot to do with identy theft. I’ve been in the landscaping business with another guy who wonts to sell out his part of a stablish business. I’m trying to get the money to buy him out. Already have 3 mother’s of work lined out pluss I have a 16000 thousdad dollar job starting Monday. I need 25000 thousand I need it soon. Can u help me

    1. Michael,

      If you have a Nav account (it’s free), I recommend you reach out to our credit and lending team for assistance. You can reach them through your account or by calling 844-636-2445.

  6. I am interested in purchasing a Chicken farm and don’t have good credit and I was wondering if yall could help.

    1. I have a business basically all the equipment to run it except for a few pieces. I’ve depleted my savings and don’t have stellar credit. I’m about finish paying for the building. Is there any help out there for me?

      1. I have a business basically all the equipment to run it except for a few pieces.I’ve depleted my savings and don’t have stellar credit. I’m about finish paying for the building,is there any help out there for me.