Here's How to Get a Business Loan if You Have Bad Credit in 2023

15 min read
bad credit business loans

Executive Summary

While having bad business credit can limit your options, it doesn’t mean that you’re barred from funding completely. In this article, we’ll talk about how you can qualify for business loans, and which options to look into. Explore business loans from OnDeck, Fundbox, Bitty Advance and Payability.

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A poor business credit score or thin credit history can get in the way when applying for small business loans. This is especially true in higher interest rate environments, when lenders pull back on credit (like now).

Traditional banks and financial institutions often don’t provide financing for businesses with bad credit scores or weak credit histories (either due to short time in business, or the presence of derogatory marks such as liens). Lending to businesses with bad credit is deemed “high risk” and banks not only have a chance of being unable to make their money back, but also of not having enough reserves to protect its depositors in case of a business’s default on a loan.

Because of this, it is far easier for businesses with a good credit history to qualify and be approved for funding. However, as more innovative solutions hit the market, there are more options that businesses with poor credit scores can apply for. The pursuit for small business financing does not have to stop at banks: a rising number of fintech and commercial companies offer small business loans that don’t require good business credit.

While having bad business credit can limit your options, it doesn’t mean that you’re barred from funding completely. In this article, we’ll talk about how you can qualify for business loans, and which options to look into.

How to improve your chances of getting a bad credit business loan

Getting a business loan with a low credit score may prove to be slightly more difficult than if you had great credit. However, following these tips can help make the process a lot more straightforward and easier.

Get to know your credit report

Knowing your business and personal credit scores (more on personal credit later) will help set your expectations early on in your search for the right business loan. Since these scores help determine which loans you qualify for and how much you can get, it is best to look at what your score currently is.

Looking at the reports is a good way to see a detailed view of where you need to improve. This will help you plan your next steps better. For instance, you may choose to improve your credit score at this stage before you start your loan applications.

Improve your cash flow

One of the factors many lenders look at is your cash flow. A red flag for lenders is seeing negative months on your bank statements, as these could indicate that your business is in distress, and thus, may pose a loss for the lender. Make sure your numbers for the last three to six months are strong to improve your chances of getting approved.

Pro Tip: On the flip side, you may have very strong cash flow, but poor credit. If this is the case, then consider finding a lender that extends funding based on bank information or accounts receivable instead of credit. Payability, Shopify, and Giggle Finance are all examples.

Do your research

While there are many bad credit business loan options available, each lender will have its own eligibility requirements. Essentially, lenders will look at your annual business revenue, personal credit score and the number of years in business. Spend some time understanding lenders’ requirements and make a list of those you qualify for. It may even be helpful to talk to other business owners in a similar position as you.

Put up collateral

One way to improve your chances of loan approval is to offer collateral as loan security. Some things of value that can be put up as collateral include company equipment, vehicles and accounts receivable. Basically, any valuable business asset that can be sold if you default on payments can be considered for collateral. You’ll just have to talk to your lender about building that into the terms.

Make sure your personal credit is in top shape

Business credit score is an indicator used by most conventional lenders to determine how financially reliable your business is. It reflects your company’s ability to pay back loans and receive goods from vendors under credit.

Your personal credit score is separate from your business. It reflects your own ability as an individual to repay loans or credit rendered personally to you. However, it still matters for business funding! If you have bad personal credit, your funding options may be even more limited.

When it comes to small business financing, including bad credit small business loans, lenders will often consider the personal credit score of the business owner during the application process. The FICO credit score is typically used when deciding whether to loan your business money. It is calculated based on how long you’ve held credit, how much credit you have, how much of your available credit is used, and your payment history.

The reason why lenders will check your personal credit score is usually to assess whether you have good enough credit to back the loan as a personal guarantor. When a lender does this, it’s known as a personal guarantee.

Personal guarantees are often added to lending contracts when the business applying for funding has a thin credit file or doesn’t have enough assets to put up as collateral. The better your personal credit score is, the more business loan options you’ll have available to you. Having a FICO above 650-700 can open a lot of doors.

Learn how to raise your FICO score

The types of loans you can qualify for with bad credit

The alternative lenders that provide loans for less than perfect credit are typically private companies and/or online lenders. They operate similar to the lending arm of banks and credit unions (ie, traditional lenders). There is a range of business loans for bad credit provided by these lenders such as:

Short-term loan: OnDeck

A short-term business loan gives business owners a lump sum with a fixed repayment period over 6 to 18 months on a set payment schedule. The repayment sum includes the principal amount and any interest charged by the lender. Since the loan is short-term, it reduces the lenders’ risk by limiting the loan amount and shortening the repayment period.

One product worth considering is OnDeck’s short-term loan with loan amounts ranging from $5,000 to $250,000 and repayment term up to 24 months. By repaying your OnDeck loan on time, you get to build your credit score and if you’re in a time crunch, the same day funding facility allows you to get funds by 5.00 pm.

Short-term business line of credit: Fundbox

This is a revolving line of credit that business owners can withdraw funds from on-demand whenever necessary. Borrowers are able to access the funds up to a specified approved amount. If you need your business line of credit extended, a renewal needs to be made either semi-annually or annually. Be mindful of repayments since you will be charged interest on any open credit balance on your account.

There are vast options when it comes to lines of credit but Fundbox stands out with its lower credit score requirements and fast funding. You get your credit decision in minutes and funds as early as the next business day. However, you’ll need annual revenue of at least $100,000 and be in business at least 6 months to qualify.

Merchant cash advance: Bitty Advance

In exchange for future credit and debit card receivables, you could qualify for a merchant cash advance (MCA) or also known as a Purchase of Future Sales Agreements. The timeframe to pay back merchant cash advances depends on the volumes of future credit card sales. There is no term limit since the payments are connected to credit cards and their sales. However, business underwriters tend to predict 6 to 18 months until the lump sum is paid back in full.

If you’re looking for a merchant cash advance, consider Bitty Advance which gives out funding amounts of $2,000 to $25,000 to many types of small businesses. You’ll need a business checking account, a credit score of at least 450, $5000 in monthly revenue and be at least 6 months in business.

Also be aware that MCAs can come with high repayment terms. Interest is calculated as a factor rate, which can be misleading or confusing for some small business owners. We demystify MCAs here.

Collateralized loans, such as equipment financing

Collateralized loans are also known as secured business loans that give lenders the authority to seize control over your collateral. In the event of non-repayment, the lender will sell off the collateral to cover the amount.

Equipment loans are a type of loan that are often collateralized by the equipment purchase. For example, a loan for a truck may repossess the truck in the event of default.

Invoice financing: LoanBuilder

Customers are given a length of time to settle their payments based on their invoice terms. Invoice financing provided by lenders allows business owners to get cash quicker than the invoice term, which could be 90 days or more. Basically, you will obtain a cash advance on your pending invoices. Since invoice financing relies on your invoices, your business or personal credit score is not a huge deciding factor. LoanBuilder provides invoice financing for those with poor credit.

Invoice factoring: FundThrough

Invoice factoring is a type of working capital loan that’s pretty similar to invoice financing. It is when a business sells their outstanding invoices to a lender at a discount. The lender then collects payments from the customers. Basically, you will obtain a cash advance on your pending invoices. The unpaid customer invoices are collected directly from the customer instead of the financed company which mitigates credit risk for the lender. Like with invoice financing, your business or personal credit score is not a huge deciding factor. FundThrough provides invoice factoring.

Invoice financing for e-commerce: Payability

Financing company, Payability, offers e-commerce entrepreneurs a range of solutions for cash flow and working capital. Based on your marketplace sales, you can qualify for two types financing solutions:

  • Capital Advance: Get up to $250k to spend on inventory or marketing based on your sales and account health
  • Accelerated daily payouts: Get your payouts the next business day after selling, instead of waiting weeks

Eligibility is based on your sales performance and history, which means that no credit checks are required. You can apply online with your marketplace account and get funds as quickly as one business day.

Business credit cards

Store cards and vendor accounts

If you’re looking for options that will help you manage your cash flow, then you can look at credit cards and/or business accounts offered by the stores or vendors you use. These are often Net-30 accounts, which are 30 day payment terms.

Check out our list of top store cards

Business credit cards for bad credit

Though credit cards come with high annual percentage rates (APR) and usually won’t come with a credit limit equal to a typical loan, they are options to help you in a crunch. If you have good personal credit, then you will have more options.

Do note that if you personally guarantee a credit card, then you will be personally responsible for the balance, even if your business cannot pay. Personal guarantees could also affect your personal credit if the business credit card reports to the consumer credit bureaus.

Read our guide to the best business credit cards for bad credit

Choosing the best loan for your business needs

With the host of options available, here are some factors to consider before making your choice:

  • Repayment terms: While your eligibility will impact the term you qualify for, it is also important that you think about the repayment time frame that would work best for you, and if you think you can realistically pay the loan back in that period.
  • Interest and other fees: In order not to be caught off guard later on, look into the interest charged on your open balance and other fees related to your business loan. Consider the total cost to borrow, and if you may want to take out a lower loan amount temporarily, and reapply for a better rate in the future.
  • Loan amount: With bad credit scores, the loan amount you qualify for will be limited. If this is insufficient for your business needs, you may need to consider adding other alternative funding for the time-being. As your credit score improves, your lenders will also consider increasing your loan limits.

Alternatives to bad credit business loans

Though there are many options for small business loans available on the market today, even the ones designed for businesses with bad credit can prove difficult for some business owners to qualify for. Here are some alternatives you can consider if you struggle to get a bad credit business loan.


If your company is developing an innovative and exciting new product, crowdfunding can be a great way to get word out there and seek funding. You may be pleasantly surprised with the response you get. There are a number of online platforms that you’d be able to launch a campaign on. Crowdfunding can also be a great way to gauge early interest in your product and get some market validation.

Even if you’re not a startup, but simply a small business that has stumbled upon tough times, crowdfunding is worth a try. For example, during the pandemic, many businesses got through shutdowns with a little help from their community.


Grants for small businesses are an excellent option since you are not required to pay them back. The only issue is qualifying for small business grants can be difficult. Check what's available from your local, state or federal government and see if you meet the eligibility requirements. Often, these grants are only made available to certain industries or causes. A great place to start is

Friends and family

Pitch your business plan to friends and family and get them onboard as investors or lenders. It may be intimidating to approach your loved ones but they are a viable resource worth considering. However, be upfront and clear about how you plan to use the funds and negotiate a repayment schedule. This helps them be aware of any risks and will help manage expectations.

More ideas for where to find money to start your business here

How to get a better business loan in the future

Bad credit business loans don’t usually come with the most favorable rates and terms in the market. Your goal should be to improve your financial position so you’ll be able to access better loan options in the future. Here’s how you can boost your chances for better loans later on:

Increase your personal credit score

As a business owner, having a good personal credit score opens you up to better financial opportunities. With a higher credit score, you’ll have no trouble when it comes to putting down personal guarantees on loans for your business and breeze through background checks.

Build your business credit score

With solid business credit, you’ll be able to apply for business financing from a wider range of providers. Conventional banks and lenders will be more willing to offer you business loans if your credit history reflects on-time payments and creditworthiness.

You can start by opening a secured business credit card and applying for vendor accounts that report to the bureaus. Be sure to keep your utilization low (around 30%), and pay all your bills on time or early.

PS — Tillful has two products that can help you build business credit: Tillful Credit Builder and Tillful Card.

Review your business plan regularly

Business targets may shift as your business operates and you may experience new challenges along the way. By taking time to review your business plan, you’ll be able to strategize new ways to drive growth - whether through e-commerce, social media marketing or cost-cutting measures. Overall, it will contribute to the health of your business which means better credit opportunities for you.

Take a smaller loan, then apply again

If you are able to qualify for a loan, but it comes with high interest rates or less than favorable terms, consider taking it if you can afford it. You can also ask your lender to extend you a smaller amount. Once you pay back your loan, you’ve established a positive relationship with the lender, and will likely qualify for a better loan if you were to apply again.

You can also consider taking a loan and refinancing it later, although this may prove difficult, and it’s not guaranteed you’ll be able to.

Last word on business loans for bad credit

Your personal and business credit scores make all the difference when it comes to business loans. Good credit scores give you access to better financing options, repayment terms, fees and perks. However, while you are on the way to better credit, alternative funding is a great avenue to help you grow your business and hit your goals.

It is important that you apply for bad credit business loans from a reputable lender. Be sure to check ratings and reviews of the lending company before submitting an application. It's a small step that will protect you from falling victim to unscrupulous lenders and loan sharks.

About the author

Ken So

Written by Ken So

Ken is the Founder and CEO of Flowcast and Tillful. Having spent most of his career before Tillful in tech and investment banking, he covers all things business credit and finance with a twist of insider knowledge.

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