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The 5 Best Small Business Loans For Bad Credit In 2020

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Bad credit

Whether due to sacrifices made while starting a business or other reasons, many business owners have poor credit. When you have bad credit, getting a business loan with fair terms and affordable fees can be difficult. While you could get a loan from one of many “payday lenders” who offer short-term loans with sky-high interest rates and tons of hidden fees, the price you’ll ultimately pay for the loan might not be worth it in the long run.

If you’re in the “bad credit” boat, you might think it’s impossible to get affordable financing for your business. Fortunately, that’s not always the case.

Many lenders are beginning to look at other business factors to judge the creditworthiness of your business. While most still pull your credit score to verify identity (and for additional reasons), you will find that high credit scores are not always necessary to qualify for financing.

The following lenders will work with you even if you have bad credit. Unlike payday lenders, they won’t take advantage of you. Of course, you’re not going to get the same good rates you would get with stellar credit — and yeah, you have to start paying back your loan pretty much right away. However, these lenders will get you cash when you’re in a pinch without ripping you off in the process.

The following are recommended lenders (and some honorable mentions) that have low credit score requirements. A couple of these lenders don’t check your credit at all. Read on to learn about your financing options.

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Best for most businesses

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Best for solving cash-flow problems

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Best for invoice-dependent businesses

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Best for new businesses

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Best for customizable business loans

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Read more below to learn why we chose these options.

Best Business Loans For Bad Credit

Bad credit business loans are offered by various online lenders. You will likely have to pay a bit more for your loan than your pal with good credit, but there are many lenders who will extend your business a loan as long as you earn enough money to make your loan payments.

1. Lendio

Lendio



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Pros

  • Free service
  • Saves time by sending your application to multiple lenders at once
  • Some lenders accept scores as low as 550

Cons

  • Not all lenders are bad-credit friendly
  • Not for brand-new businesses that aren’t making money yet

Lendio is not actually a lender. It’s an online loan marketplace you can use to search and apply for business loans of all types, including short and medium-term loans, lines of credit, and merchant cash advances, among others. Lendio has a vast lender network, which includes some lenders that accept applicants with bad credit (with a score as low as 550).

Lendio’s free service lets you prequalify for and compare multiple loan offers, so you can select the best one. Lendio saves you time and also ensures that you secure a fairly-priced loan, even if you have bad credit.

Lendio Borrower Requirements

Depending on which loan you apply for, Lendio’s borrower requirements vary. However, the company recommends that you at least meet the following minimum requirements:

Time In Business:6 months
Business Revenue:$10,000 per month
Personal Credit Score:550

Honorable Mention

  • Fundera has a similar online loan marketplace that lets you compare and apply to different business loans online.

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2. Kabbage

Kabbage



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Pros

  • No minimum credit score
  • Approval decision only takes a few minutes
  • Mobile-friendly with dedicated mobile app
  • Get a spending card linked to your LOC

Cons

  • Rates can be high
  • Front-loaded fees

Kabbage is a popular online lender that offers easy-to-use lines of credit for businesses. Although the company does check your credit score when you apply, Kabbage does not have any specific credit score requirements. Another bonus: For most merchants, the whole application process only takes a few minutes, after which you can start drawing from your credit line.

On the other hand, Kabbage’s rates tend to run a little high, and many people are critical of its fee structure (which is front-loaded, making it difficult to save on fees). Overall, however, Kabbage is worth investigating if you are looking for fast and easy access to a line of credit.

Kabbage Borrower Requirements

Even though Kabbage doesn’t have a minimum credit score requirement, it does require that you meet the following time in business and business revenue qualifications:

Time In Business:12 months
Business Revenue:$50,000 per year (or at least $4,200 for the last three months)
Personal Credit Score:N/A

Honorable Mention

  • BlueVine has a small business line of credit as well, but you’ll need a “fair” credit score of at least 600 to qualify (among other qualifications).

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3. Fundbox

Fundbox



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Pros

  • Only need credit score of 500
  • No time-in-business requirement
  • Good for businesses with unpaid invoices
  • Get approval decision in minutes

Cons

  • Small credit limits ($100K or less)
  • Must repay loan quickly (over 12-24 weeks)

Because you can borrow money based on the value of your unpaid invoices, invoice financing services such as Fundbox are a useful tool for B2B and B2C businesses. With Fundbox, you can borrow 100% of your invoice value and repay in weekly installments over 12 or 24 weeks. If your business doesn’t deal with invoices, Fundbox also offers a traditional line of credit that is not backed by specific collateral.

This lender uses algorithms to gain a holistic view of your business and come to fast lending decisions. Most applicants will be able to fill out their application and learn about their eligibility in a few minutes.

Fundbox Borrower Requirements

Before you apply to Fundbox, first make sure you meet the following minimum qualifications:

Time In Business:No time in business requirements but must be able to show at least two months of activity with compatible accounting software or three months of transactions in a compatible business bank account
Business Revenue:$50,000 per year
Personal Credit Score:500

Honorable Mentions

  • BlueVine offers invoice factoring, a service in which you sell your unpaid invoices at a discount in exchange for immediate cash. Unlike many invoice factors, BlueVine does not require long-term contracts or factoring of specific invoices. At a maximum credit facility of $5 million, this company offers larger credit lines. You’ll need a minimum credit score of 530 to qualify (among other requirements). Don’t know whether to go with Fundbox or BlueVine? Check out our comparison.
  • Riviera Finance offers more traditional invoice factoring services than Fundbox. This service can work with businesses in most industries, regardless of your time in business, revenue, or credit score. It offers a wide range of contracts, from month-to-month to 12 months in length.

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4. Credibly

Credibly



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Pros

  • Credit score can be as low as 500
  • Only need 6 months in business
  • Discount for early repayment
  • Loans as large as $400Ks

Cons

  • Can take longer than some other online lenders
  • Blanket lien required
  • Rates can be expensive

Credibly offers merchant cash advances and short-term working capital loans to businesses that have been in operation for as little as three months. Business expansion loans are also available. Credibly loans are not available in every state, so make sure Credibly serves your state before applying.

Credibly’s credit score requirements are quite lenient—you only need a score of 500 for a working capital loan or merchant cash advance. Credibly’s borrowing rates and terms are reasonably in line with those of similar lenders.

Credibly has a relatively easy online application process and good customer service. However, some users say that the application process took longer than expected. Note, the “48-hour funding” that Credibly advertises refers to how long it will take to receive the funds after your application is approved. Still, as long as you’ve got all your documents ready, the entire time from application to funding usually doesn’t exceed five days.

Credibly Borrower Requirements

To qualify for a working capital loan, make sure you meet the following minimum borrower requirements before applying:

Time In Business:6 months
Business Revenue:$15,000 per month
Personal Credit Score:500

Honorable Mention

  • LoanBuilder, discussed above in more detail, is another poor-credit-friendly financing option that could be used for working capital once you have nine months in business.

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5. LoanBuilder

LoanBuilder



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Pros

  • Credit score can be as low as 550
  • Customizable loans
  • Easy application
  • You don’t need to have a PayPal account

Cons

  • Not available for startups
  • No discounts for repaying early

LoanBuilder, as its name would imply, lets you “build” your loan to a certain extent. After you are pre-approved for a loan, you can tinker with the loan amount and term length and see how those changes affect your repayments. This PayPal-owned service makes it super easy to put together a customized short-term business loan that works for you, even if you have a credit score as low as 550.

Note that the service is also marketed as “PayPal Business Loans.”

LoanBuilder Borrower Requirements

Before applying for a LoanBuilder loan, make sure you meet the following minimum qualifications:

Time In Business:9 months
Business Revenue:$42,000 per year
Personal Credit Score:550

Your business must also be US-based.

Honorable Mention

  • PayPal Working Capital is another PayPal short-term business loan option. It does not have any hard-stated credit score requirements. However, this loan is only available to PayPal sellers.

Read our in-depth review

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Business Loans & Bad Credit: FAQs

Is it possible to get a business loan if I have bad credit?

Yes. However, these loans tend to be short-term loans that you’ll typically have to repay in a year or less, and they tend to charge higher borrowing fees compared to business loans with stricter credit score requirements. Business loans for bad credit borrowers may also be smaller (usually less than $250K) than loans that require good credit.

It will be easier for you to get a business loan with bad credit if you have strong business credentials in other areas, i.e., healthy business revenue and 1+ years in business.

What credit score do I need to get a business loan?

You will usually need a minimum score of at least 500 or 550 to secure a business loan, such as a short-term loan or line of credit. Some online lenders do not have any stated minimum credit score requirement, but they will still usually pull your credit and verify your business’s information to look for any red flags that would indicate you won’t be able to repay your loan.

Certain types of business financing products, including invoice financing and equipment financing, may not place much or any weight on credit score as a requirement, as the loan is “self-secured” by the invoice or equipment being financed. Merchant cash advances are also less likely to require a certain credit score. However, traditional term loans almost always have a minimum required credit score.

Where can I get a business loan for bad credit?

This depends on several factors, including what specific type of financing you need, how long you’ve been in business, how much revenue your business makes, and your credit score. Here are some bad-credit friendly business loan options for credit scores below 600:

  • Lendio
  • Kabbage
  • Fundbox
  • LoanBuilder
  • Credibly
  • PayPal Working Capital (must have a PayPal Business account)
  • Rivera Finance

If you can get your score up to 600, you might qualify for a few other lenders/loan services, including OnDeck, Fundera, and BlueVine. (Note: BlueVine’s credit score requirement for invoice factoring is only 530.)

How much do bad credit business loans cost?

Loans for bad credit are not cheap. You could have to pay as much as 20 to 40% tacked onto your loan amount, possibly more. This means if you get a loan for $100,000, you could have to pay back $140,000 in total when you factor in all the fees. But it really depends on your business credentials, which lender you choose, the size and term length of your loan, etc. Often, short-term online lenders have loan calculators on their websites to help you get a rough idea of what your fees could be.

Are there any resources or organizations that can help me get a bad credit business loan?

If you have not been able to qualify for a business loan on your own due to bad credit, it is a good idea to check if there are any local business associations offering low-interest loans to struggling small businesses in your region. Local CDFIs in particular may be able to help provide a loan. The SBA has a lender match tool that can help you find a CDFI lender or SBA-approved small lender in your area.

More information:

More Resources For Business Loans & Bad Credit

Even if you have bad credit, it is still generally possible to find business loans.

In most cases, you’ll find higher rates and fees than somebody with a better credit score might receive. To see what shape your credit is in before you start applying for loans, you can use a free credit score service. Nonetheless, if you don’t have the time or ability to improve your credit before applying for loans, these lenders will give you a good place to start.

Small business loans can enable businesses to purchase needed inventory and equipment or cover payroll during slow seasons. Though a traditional bank requires a good credit score to qualify for a loan, many online lenders will be willing to lend to you even if your credit isn’t anything to brag about. Just make sure that you look over the terms of the loan first before you accept it because a lot of short-term lenders have very crappy terms.

If your credit score is in the 600s or higher, you might want to compare rates from these 5 Online Loan Companies That Won’t Screw You Over for some even better loan options with longer terms and potentially lower fees.

Finally, another option to consider as an alternative to a loan is a credit card. If you have business expenses you can pay for with a credit card and don’t necessarily need liquid cash, you should read about the best credit cards for bad credit to explore your best options.

Here are even more resources for businesses with bad credit:

⭐️ Featured Marketplace for SBA/PPP Loans ⭐️

Want to outsource the job of comparison shopping for SBA loans or other types of financing? Try Fundera.

Fundera



Get Started

Read our Review

Fundera is a marketplace that gives you access to quotes from a large pool of lenders. This makes it easy to do meaningful side-by-side comparisons with no strings attached, whether you’re looking for an SBA loan or other financing options.

A Last Look At Our Top Picks

  1. Lendio
    Summary - Best for most businesses
  2. Kabbage
    Summary - Best for solving cash-flow problems
  3. Fundbox
    Summary - Best for invoice-dependent businesses
  4. Credibly
    Summary - Best for new businesses
  5. LoanBuilder
    Summary - Best for customizable business loans
Shannon Vissers

Shannon Vissers

Shannon is a writer and editor based in San Diego, CA. Shannon attended San Diego State University, graduating in 2005 with a BA in English. She is the former editor-in-chief of SteelOrbis, an online trade publication. Shannon has also published articles for LIVESTRONG.COM, eHow, Life'd, and other websites. She has been with Merchant Maverick since 2015, writing about POS software, small business loans, and financing for women entrepreneurs.
Shannon Vissers
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5 Comments

Responses are not provided or commissioned by the vendor or bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the vendor or bank advertiser. It is not the vendor or bank advertiser's responsibility to ensure all posts and/or questions are answered.

    Liam Patterson

    Great post! Thanks for sharing the knowledge and keep up the good work.

      This comment refers to an earlier version of this post and may be outdated.

      George Matlou

      I have started a business and I want to get funds to enlarge the business feather but I short finance
      I have more client but I can’t give them the service that they need because of shortage of stock

        This comment refers to an earlier version of this post and may be outdated.

        Sagar Dongare

        Nice list of loans provided in this blog. Thanks for sharing it.

          This comment refers to an earlier version of this post and may be outdated.

          Lucy Wapen

          Hi Shannon. My name is Lucy Wapen & I’m from Papua New Guinea. PNG is in the Pacific Island & its a developing country. I have a good business Ideal that I would like to do. I have search the internet, there’s a lot of scam that I came a cross. I would like to get some info from you on the real organization or financial firm that help women like me in developing country to start up their business dream whether it be a business loan or a grant. I want info on these areas pls help.
          Thank you kindly.
          Lucy

            This comment refers to an earlier version of this post and may be outdated.

            Shannon Vissers

            Hi Lucy, most of the lenders I write about are for US-based businesses but Kiva is one international microlender you may want to look at for a 0%-interest loan up to $10K. I believe Accion has some global partners as well that might provide loans in your area. So I would check both Kiva’s and Accion’s websites. As for grants, the Cartier Women’s Initiative grant contest is open to women in any country. Good luck to you!

              This comment refers to an earlier version of this post and may be outdated.

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