Business Loans for Bad Credit

If you’re looking for a small business loan with bad credit or no credit, you could face some extra hurdles. Banks tend to prefer borrowers with good credit scores. If you have bad credit, or your business has no credit history yet, finding a lender may take more work.

Fortunately, there are options for getting business loans for bad credit. Even if you have a low personal credit score, you may be able to find lenders with options that could help you start, grow, or expand your small business.

Below, you’ll find a guide to resources that may help you with the process of applying for a small business loan when you have bad credit, as well as different loan options.

What Is a Bad Credit Business Loan?

A bad credit small business loan is a financing option designed for businesses with low credit scores or limited credit history. These term loans often come from alternative lenders, as traditional banks typically require strong credit.

These lenders may rely on other factors, such as cash flow, collateral, or business performance, to assess eligibility. While they may provide crucial funding for operations or growth, bad credit business loans usually come with higher interest rates and fees due to the perceived risk.

How Bad Credit Affects Your Business Loan Options

When you have “bad” credit, it is possible you may still be able to get a traditional loan. But if so, the interest rate is likely to be higher and the terms less favorable than if your credit fell in the “good” or “fair” range. However, depending on many factors such as the nature of your business, there may be options open to you, even with bad credit.

Credit Score Ranges and Lender Requirements

Every lender is different and has different requirements. But the table below shows some general parameters for what may be available options for getting a business loan with poor credit.

Credit Score Range	Possible Options
300-579 (Poor)	It may be challenging to qualify for traditional loans. Equipment financing and invoice factoring tend to rely less on credit scores and may still be available.
580-669 (Fair)	Some lenders may consider applications in this range, potentially at a higher cost.
670-739 (Good)	A score in this range and above may open up more options, though approval still depends on the lender’s full review of the business. The higher your score, the more likely you are to get competitive terms.

What Is Considered Bad Credit?

Lenders typically view your personal credit score, a rating derived from your credit history, as an important indicator of your creditworthiness. Similarly, when your business builds up a credit history, it may receive a credit score that potential lenders can use to assess whether to lend it money.

If your credit rating isn’t high enough or your business hasn’t been in existence long enough to build up a credit history, potential lenders may evaluate you as having bad credit or no credit, and it may be harder for you to get good terms on financing or even any financing at all.

Understanding what lenders may be looking for could help you figure out your best options for getting business loans for bad credit.

Personal Credit vs. Business Credit

A common question when you’re trying to figure out how to apply for a bad credit small business loan is whether a lender will look at your personal credit score or your business credit score.

Personal credit reflects your individual credit history, including your borrowing and repayment history on items like credit cards and loans. It’s tied to your Social Security number (SSN) and includes details about any credit-related inquiries. Your credit score is used to sum up how creditworthy you are so that potential lenders can assess how risky lending money to you might be.

Most personal credit scores range from 300 to 850 (although there are a few different scoring models with slightly different scales). Less than 580 is typically considered a poor score.

Business credit scores may be issued by several different companies with different systems. Some (though not all) range from 1 to 100, and higher scores are typically viewed more favorably by lenders. The scores are generally determined by factors that can include payment history, business history, credit utilization ratio (how much the business currently owes divided by its credit limit), and type of industry.

Every lender may have its own rules, but on a scale of 1 to 100, the Federal Reserve’s Small Business Credit Survey treats a business credit score of 80 or higher as low risk, 50 to 79 as medium, and 1 to 49 as high.

Recommended: Small Business Loans for Sole Proprietors

Why Your Personal Credit Score May Matter for a Business Loan

Many businesses start out with a sole proprietor — just one person who owns the business. When the business is new and hasn’t had the chance to build up a credit history yet, potential lenders may look at the owner’s personal credit when they’re assessing the business’s creditworthiness. Many lenders may consider your FICO® score (the credit score issued by the Fair Isaac Corporation) when evaluating an application for a small business loan.

While FICO has different versions of its credit scores for different purposes, personal FICO credit scores are generally determined using the following factors:

•   New credit – 10%

•   Credit mix – 10%

•   Length of credit history – 15%

•   Amounts owed – 30%

•   Payment history – 35%

FICO Scores use these five categories, but the importance of each may vary from one person to another. Other scoring models may weigh these factors differently. For example, a person with a long credit history will be evaluated differently than someone who is just beginning to establish credit.

Lenders use multiple factors to determine which small business financing options may be available to you. But even though your credit score is just one factor, lenders may have minimum personal credit score requirements to qualify for loan products. That’s why it can be useful to know what your personal credit score is and whether it’s considered good or bad when you’re applying for a business loan.

Each lender sets its own credit requirements. The Federal Reserve’s Small Business Credit Survey, for example, counts a personal credit score of 720 or higher as low credit risk and a score below 620 as high risk. On March 1, 2026, the SBA stopped using a FICO small business credit score to screen 7(a) Small Loan applications. Alternative lenders, such as merchant cash advance providers and factoring companies, may accept lower credit scores, but you may face higher total borrowing costs due to increased interest and factor rates.

Recommended: What Is Considered a Small Business?

Minimum Requirements for a Business Loan

Even when you have excellent credit, your credit score is not the only thing potential lenders will want to review. And especially when you have bad credit or no business credit history, there are other factors that can be significant in determining whether you qualify for a loan and on what terms.

Time in Business

When reviewing a loan application, lenders may want to know how long your business has been in operation. A longer track record may show them that your business is indeed a functioning enterprise. Each lender sets its own time-in-business requirements.

Annual Revenue Thresholds

Lenders may also have requirements that relate to your business’s yearly revenue. Typically, they’ll want to see from your bank statements that your business is regularly earning money to help them feel confident about its viability. Revenue requirements vary by lender and loan type.

Collateral and Personal Guarantees

In some cases, lenders may want extra assurance that lending to you is not risky. They may ask you to put up collateral – an asset you own with which you can secure the loan. If you default, the lender will be able to claim the asset and recoup some of their losses.

Lenders may also ask you to provide a personal guarantee. This is your pledge that, if your company defaults on the loan, you will personally make good on it.

Bear in mind that both of these tactics involve risk for you. If your company can’t pay back the loan, you could lose your collateral or find that you must pay it back from your personal funds.

How to Apply for a Business Loan With Bad Credit

Getting a business loan with a lower credit score may require a bit more legwork. There are four steps to applying for a business loan with less-than-stellar credit.

Check Your Credit Scores

To find your personal credit history, you can request a credit report from any of the major bureaus: Equifax®, TransUnion®, or Experian®. Each bureau provides a free copy of your report every week at AnnualCreditReport.com.

These reports do not include your credit score, however. You may request your FICO® score from your bank or credit card company (it may already appear on your statement or be available online).

When you’re looking into a bad credit business loan and you want to know your business credit rating, however, digging that up may be more challenging than finding your personal credit rating. The following sources may provide comprehensive business credit ratings, but keep in mind that some are paid services: Dun and Bradstreet®, Experian, and Equifax.

After you’ve gathered your credit reports and scores, you may compare your ratings against potential lenders’ minimum requirements to get a sense of how eligible you might be for financing.

Recommended: What Is the Minimum Credit Score for a Business Loan?

Research Lenders

When you’re applying for a bad credit business loan, researching lenders is crucial to ensure you find the best terms and avoid predatory practices. Interest rates, fees, and repayment conditions may vary by lender and could significantly impact your business’s finances.

Comparing options may help you identify reputable lenders who specialize in bad credit loans and assess their flexibility in evaluating factors like cash flow or collateral.

Review Terms

Reviewing loan terms when applying for a bad credit business loan is critical to avoiding unexpected financial strain. Terms like interest rates, repayment schedules, fees, and prepayment penalties significantly impact the total cost of the loan and your cash flow.

Bad credit loans often come with higher costs, so understanding these details helps ensure you’re not agreeing to unfavorable terms.

Prepare Documentation

When you’re planning to apply for bad credit business loans, it may help to gather the following documents:

•   Personal and business credit reports

•   Business bank and financial statements

•   Legal documents related to your business

•   Business and personal tax returns

•   Personal identifying documents

•   Business plan

Some lenders may not require all of these documents, but having them all ready in case they’re needed can be helpful. In fact, some lenders may even require additional documentation. And while you’re gathering this paperwork, it can also be a good opportunity to assess your business’s financial status, too.

Recommended: What Are Business Consolidation Loans?

6 Steps That May Improve Your Chances of Getting a Business Loan

Working toward a higher credit score can take time, but a strong credit score may improve your chances of securing a more competitive interest rate on a small business loan. The following steps may help improve your chances of getting a small business loan.

1. Check Your Credit Reports and Dispute Any Errors

It’s important to monitor your personal and business credit reports to ensure there aren’t any incorrect entries. An error on your credit report could lower your score, making it more difficult for you to secure the financing your business needs.

You may check your personal credit reports with the three major credit bureaus (TransUnion, Experian, and Equifax) and report any potential errors directly to the relevant bureau. You may get a free copy of each of these credit reports every week.

You may also want to check your business credit history with Dun and Bradstreet, Experian, and/or Equifax. Catching and correcting any discrepancies early may help lenders see accurate information when they review your application.

2. Establish Credit With a Business Credit Card or Line of Credit

One way to work toward building your business credit score may be using a business credit card to make small everyday purchases. To help build credit, it’s important to pay your business credit card bill on time each month and avoid carrying a balance.

If you qualify for it, another option that may help you build business credit is taking out a business line of credit. Like a credit card, a credit line lets you take out available credit to make purchases and then pay the total off each month.

And finally, keeping your business credit card or line of credit accounts open, even if you aren’t using them, may help, since canceling a business credit card could impact your business credit score.

3. Keep Your Business Expenses Separate from Personal Expenses

There are a number of reasons to keep your business and personal expenses separate. These include building credit, keeping your records accurate, and streamlining your taxes, as well as legal implications. Whether you’re just starting your business or trying to build good credit, these steps may help you establish and maintain a separation between your business and personal expenses:

•   Opening and maintaining separate business and personal bank accounts

•   Keeping personal expenses off your business credit card and vice versa

•   Getting an employer identification number (EIN) for your business

•   Working with a bookkeeper to manage accurate accounting for your business

4. Maintain Your Personal Credit Score

Can you get a loan with a 500 personal credit score? It may be difficult, which is why it’s important to maintain strong personal credit if it’s at all possible.

Even though your business and personal credit are separate ratings, having a good personal credit score may improve your chances of getting approved for a business loan. When lenders see strong personal credit, it may signal that you’re likely to be a trustworthy borrower. One way to help build and maintain a good personal credit score is to pay your credit card bills and other outstanding debts on time.

5. Take the Time to Build Credit

Trying to figure out how to apply for a small business loan with bad credit and no collateral can be frustrating. Building credit may take a while, but a strong credit history may help you qualify for more favorable rates and terms on future loan products.

Some vendors and suppliers report your business dealings to the major credit bureaus, though not all do. Paying your outstanding balances and invoices on time may help you establish and build better business credit.

If you’re able to wait to apply for a loan, delaying your application could be an opportunity to continue paying down other debts and credit cards or to make any other regular payments that show a stable financial history. By taking the time to build a good track record, you may show your dependability as a borrower and potentially improve your chances of being approved for more favorable loan product terms in the future.

Recommended: Pros and Cons of an LLC

6. Diversify Your Credit

Creating a good credit mix is an important step in building good business credit. A mix of credit means that you may have varied lines of credit, credit cards, loans, and other products. Once you’ve established good business credit, having a well-rounded credit mix may help you maintain or potentially build your credit score, so long as you’re responsibly making payments on each account.

Another factor to keep in mind is your credit utilization ratio. This is how much available credit you’re using. Credit scoring models look at how close you are to being maxed out. Experts advise keeping credit use at no more than 30% of your total credit limit, according to the Consumer Financial Protection Bureau.

Types of Alternative Bad Credit Business Loans

Besides traditional term loans, there are other financing options that could be available to you, even if you have low credit or no credit.

Secured Business or Personal Credit Cards

When you get a secured credit card, you have to provide a security deposit to open the card account. That deposit acts as collateral in the event you default on your payments. This lessens the risk for the credit card company and therefore may improve your chances of getting approved.

If you are looking for a startup business loan with bad credit and no collateral, opening a secured personal credit card or a secured business credit card may be an option to consider. If you make payments on time for a certain period, your creditor may even let you upgrade to an unsecured card.

Recommended: Unsecured Business Loans

Peer-to-Peer (P2P) Lending

Peer-to-peer lending lets borrowers and investors connect directly, eliminating the need for a financial institution to facilitate the loan process.

Borrowers and lenders use P2P networks to find each other based on business needs, purpose, and qualifications. Fund transfers and payments go directly through the P2P platform for a simple, manageable process. Because you work with an investor directly, there may be more emphasis placed on your business’s purpose and long-term goals.

Equipment Financing

Equipment financing may help you purchase necessary equipment, machinery, and other items for your business. Equipment financing may be a viable loan option for a business with a low credit score or limited collateral because the equipment itself acts as collateral. In other words, if you default on your payments, the lender can claim the equipment to recoup its losses.

Equipment financing could help you purchase big-ticket items without the financial strain of paying a lot of money all at once. Terms vary by lender and often depend on the useful life of the equipment. For SBA 7(a) loans, terms generally run 10 years or less, unless the equipment has a longer useful life.

Invoice Factoring

A short-term financing option known as invoice factoring lets you sell your invoices to a factoring company, which assumes responsibility for collecting payments from your customers. Typically, B2B companies or operations with irregular billing cycles may turn to this type of financing.

Businesses may use invoice factoring as a quick way to temporarily improve business cash flow or when they need a bad credit business loan. Since the factoring company is responsible for collecting payment from your customers, it’s important to partner with a company that’s reputable and uses fair collection practices.

Inventory Financing

Inventory financing helps a business maintain cash flow while it’s purchasing additional inventory, typically in preparation for a seasonal spike. That new inventory serves as collateral, and lenders base the financing amount on a percentage of its value. This may be an option if you don’t have other collateral and need funds to stock up on inventory.

Microloans

Microloans are loans from nonprofit lenders for smaller loan amounts, typically $50,000 or less. If you require just a small amount of financing and don’t qualify for a larger loan, a microloan may help you get the funding you need to cover basic startup costs and other business expenses.

Since newer, smaller businesses often seek microloans and haven’t yet established business credit, it’s helpful to have an established personal credit history to help the lender make its financing decisions.

SBA microloans may also be available through intermediary lenders that partner with the SBA. The average SBA microloan is about $13,000, terms run up to seven years, and interest rates generally fall between 8% and 13%. The intermediary lender makes all credit decisions and sets the terms.

Merchant Cash Advance

A merchant cash advance is not actually a loan, but a way for a small business (“merchant”) to get a cash advance for business expenses in return for a portion of its future credit or debit card sales. Merchant cash advance companies purchase a business’s future sales at a discount and, in return, provide quick financing.

A business owner trying to get an unsecured business loan with bad credit may find that merchant cash advances are an option for quick cash, but they often come with high factor rates and fees.

Additionally, since merchant cash advances are not technically loans, companies that provide them may not face the same federal oversight and regulation as traditional lenders. The Consumer Financial Protection Bureau’s 2026 small business lending rule, for example, excludes these products from the transactions lenders must collect and report data on.

Researching different merchant cash advance companies may help you find one that operates in a fair and trustworthy manner.

How to Avoid Predatory Lenders

When you need a bad credit business loan, you may feel under pressure, and unfortunately, unscrupulous lenders may be poised to take advantage. Here are some warning signs that may point to a predatory lender.

•   “Everyone accepted” promises. A reputable lender reviews each application and can’t guarantee approval, so a promise like this may signal a problem.

•   Unclear costs. A predatory lender may try to disguise exorbitant costs by making fees and rates hard to find. A reputable lender typically provides you with a full repayment schedule before you sign.

•   Excessive fees and demands. Even when the prices are clear, extensive upfront fees, a balloon payment, or a request for an unusually large amount of collateral may be red flags.

•   High-pressure sales techniques. A lender that withholds written documentation (or time to review it), pushes you to sign immediately, or tries to dissuade you from talking to a financial advisor may not be acting in good faith.

The Takeaway

Securing a business loan with bad credit can be challenging, but it’s not impossible. Exploring alternative lenders or putting up collateral may improve your chances of approval.

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FAQ

Can I get a business loan with no collateral?

Yes, there are some business loan options that don’t require collateral, particularly from online lenders. However, that’s not the case for all small business loans. Some may require collateral to qualify, especially if you don’t have strong credit. There are also other lending options that essentially have collateral built into their structure, including equipment financing and secured credit cards, which may be options if you have no other form of collateral available.

Can I get a business loan with bad personal credit?

Yes, there may be options for securing business funding, even if you have bad credit. While many lenders look at your personal credit to help determine your eligibility and loan terms, some alternative lenders and online business loans may be available to people who are still building their personal credit. Providers of certain other products, like merchant cash advances and invoice factoring, may also consider individuals with bad credit.

Are any banks easier to get a business loan at than others?

Banks differ in their evaluation criteria. In the Federal Reserve’s July 2026 survey of senior loan officers, banks reported leaving their standards for business loans basically unchanged. Each bank sets its own requirements for credit, time in business, and revenue.

Are all business loans based on credit scores?

Not all business loans are based solely on credit scores. While traditional lenders prioritize creditworthiness, alternative lenders may also consider factors like cash flow, revenue, and business potential, providing options for businesses with lower scores or no credit history. However, stronger credit may improve loan terms and approval chances.

What is the easiest type of business loan to get with bad credit?

That depends in part on your situation. A business with significant credit card sales might qualify for a merchant cash advance, though this type of funding often comes with high costs. Short-term loans from online lenders and microloans from nonprofit lenders may be other options.

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This content is for educational and informational purposes only. The products, services, or features discussed may not currently be available via the SoFi platform. Any references to third-party products, services, or companies do not constitute an endorsement, recommendation, or solicitation by SoFi. Readers should independently evaluate their options and consider their individual financial needs and circumstances before making any decisions. ©2026 SoFi Technologies, Inc. All rights reserved.

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