How Do You Get a Business Loan with Bad Credit?

If your credit history is holding you back from getting financed by traditional institutions, we’re here to be the bearers of good news—it doesn’t have to. Luckily, there exists a wide range of small business loans you can take advantage of today. As the financial sector has spilled into the online world, the playing field has opened up for loans to become more readily available to those who were previously not eligible for them due to credit issues. No doubt it’s easier if scores are great, but there are options to get a business loan with poor credit. At AdvancePoint Capital, acquiring a small business loan, no matter what level your personal FICO, is possible. By working with AdvancePoint Capital, you can enjoy the benefits of alternative lenders and bad credit options.

Banks and credit unions do not typically provide funding for small business owners with bad credit because they have to protect their depositors when offering bank loans. That’s where AdvancePoint Capital comes in to play for a small business with bad credit. We understand that running small businesses takes initiative, courage, and support. You may need cash for working capital, renovations, expansions — the list goes on. If one of those key elements is missing from your business, the structure can quickly fall apart. Having the opportunity to access capital for your business while struggling may be the very thing you need to catapult your company into the next income bracket. So, let’s dive into business loans for bad credit that you can be better prepared for.

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What Defines a Bad Credit Business Loan?

Credit bureaus do their calculations and come up with a FICO score based on a preset algorithm. These scores range from 300 to 850, and your approval rates for business loans and the interest rates you are given are based on your own individual score.

Personal Credit is about more than just a FICO Score. In 2020, lenders not only look at FICO scores but have developed their own risk models, which look at what type of tradelines you have(revolving options like credit cards, installment loans like mortgages and car loans, as well as other forms, how many trade lines you have, how long of a payment history you have with those trade lines, as well as availability all play a role in the decision. Bad credit business loans are those that offer solutions for those struggling with their scores.

How Personal Credit Score of Business Owner Impacts Bad Credit Business Loans

Both traditional and alternative lenders look at the personal credit score of small business owners because it is a key indicator of willingness to repay behavior. Whether it’s personal loans or business loans made to small businesses, the data shows lenders that this metric is a key indicator of repayment — especially with bad credit business loans. The interest rate of the loan may also be affected.

Here’s a breakdown chart of the range of personal credit score options available by Experian, Trans Union, or Equifax:

If you’re a credit score junkie like we are at AdvancePoint Capital, here’s a source of information related to what’s evaluated in your personal credit FICO score:

The bottom line about bad credit business loans is that although you don’t need a minimum credit score, the better the business owner’s personal credit history the more loans and options that are available from online lenders. This may be especially difficult for startup companies looking to find the best business loans available, with little repayment history or time in operation. However, there is plenty of opportunity for companies of all sizes to find the business funding they need through online resources.

Top 7 Best Options for Bad Credit Business Loans in 2021

Let’s look at the best bad credit business loan options that are available in the marketplace.

1. Short Term Loans

Short-term business loans cater to bad credit score risk by shortening the length of time to repay and also limiting the loan amount that businesses can acquire creating payments that are affordable but protected against the bad credit risk of poor scores through a time of repayment and frequency of payments. This type of bad credit small business loan comes with a fixed amount “lump sum” provided upfront, with a fixed payback amount over fixed repayment terms of typically 6 to 18 months (this period of time is defined as a short term business loan). This cost is called a “Factor Cost” and is not principal and interest like other loans. Short-term business loans, unlike a traditional small business loan, require less documentation with just bank statements and a one-page application process. The good news is short term bad credit small business loans require very little paperwork and bad credit score requirements are much more forgiving than traditional small business loans.

Short Term Business Loans Product Overview

Rates: from 1.09% up to 1.45%
Loan Terms: 6 to 18 months
Fees: Origination Fees that range from 0%-5%
Payments: Monthly, Bi-Weekly, Weekly, and in some cases daily Monday-Friday to reduce risk
Personal Credit Score Standards: All credit accepted from bad credit to excellent credit scores. No minimum credit score required to get a business loan.
Time in Business: 6 months or more
Special Features: Fast Application Process. Approval of funding can be same day to 24 hours

2. Merchant Cash Advances

Merchant Cash Advances, also known as a Purchase of Future Sales Agreements, advance a “lump sum” of money up front to a small business owner with a discounted purchase price (also known as specified amount) to payback. The merchant cash advance is repaid by taking a fixed percentage of future credit card sales batches until the payback amount is paid back in full, there is no term limit with advances as the fixed back percentage never changes. The time frame to pay back merchant cash advances depends on the volumes of future credit card sales. There is no term limit with this product as payments are connected to credit cards and their sales, but business underwriters try to predict repayment between 6 to 18 months. While advances are technically not “bad credit business loans,” they do offer financing options for small business owners with a bad credit history. A merchant cash advance is not a term loan.

Rates: 1.15% up to 1.45%
Terms: No term limits estimated payback periods are 6 to 18 months
Fees: Typically 1% to 3% Origination Fees
Payments: Fixed percentage splits from future credit card batches
Personal Credit Score Standards: All credit profile types considered from Bad Credit to Excellent Credit. No minimum credit score required.
Time in Business: 6 months or more

3. Business Cash Advance

Business Cash Advances, also known as a Purchase of Future Sales Agreements, advance a fixed “lump sum” of cash with a discounted purchase price, also known as a specified amount, to payback. The advance is repaid by taking a fixed percentage of future overall sales, which is different than a merchant cash advance, which takes a percentage of future credit card sales. Payments are collected by a fixed daily or weekly payment deducted from a business bank account, which is based on the fixed percentage of future sales. Again, while technically not under the umbrella of “bad credit business loans,” it is a perfectly sound option from alternative lenders to get the financing options for you.

Reconciliation of payments can occur after every month if the fixed payments taken are more than the set fixed future percentage of sales in the agreement. A refund back to the merchant can occur if an overpayment is made month to month while a payback balance exists. This repayment continues until the payback amount is paid back in full. Therefore, there is no repayment term limit with advances as the fixed payback percentage is attached to future sales. This process mitigates credit risk by allowing the monthly collection of payments to be adjusted, unlike short-term business loans.

The estimated repayment period is associated with credit score risk and cash advances are expected to be repaid in 6 to 18 months, but again, it may be longer or shorter depending on future credit card sales as the time period is not set in stone like a short term loan. A business cash advance is not a term loan.

Rates: 1.10% up to 1.45% Factor Rates
Terms: No term limits estimated payback periods are 6 to 18 months
Fees: Typically 1% to 3% Origination Fees
Payments: Fixed ACH payments are weekly or daily Monday-Friday
Personal Credit Score Standards: All fico credit score types from Bad Credit to Excellent credit profile is considered. No minimum credit score required.
Time in Business: 6 months or more
Special Features: Fast Application Process.

4. Invoice Financing (Accounts Receivable Financing)

Invoice financing, also known as “Invoice Factoring” or “Accounts Receivable Financing,” is a type of financing that allows small businesses to get cash quickly from unpaid customer invoices that they would otherwise be waiting up to 90 days or more, depending on the invoice term, to receive payment from the customer.

This type of small business financing allows you to get an advance of up to 95% percent of purchase orders or outstanding invoices from your customers. A company will advance a set amount of the unpaid invoice to the business owner and then collect directly from the client or customer for the unpaid customer invoices portion. This is an excellent option to improve cash flow.

The business owner’s credit score is NOT evaluated. Therefore credit is not an issue. The credit score approval is directed to the customer/client, so there is little documentation required other than an application, accounts receivable report, and contact information of the companies you invoice on a regular basis. A great product for those struggling with poor credit.

They mitigate credit risk by collecting unpaid customer invoices directly from the client/customers instead of allowing the owner to pay them back. Invoice factors also look at the client/customer credit risk factors in making approval for invoice advances and will not extend an invoice advance beyond typical invoice term of 30, 60, or 90 days, limiting exposure to clients not paying unpaid customer invoices and causing a financial loss for the financing company. These companies are monitoring daily invoice payments and work closely with customers and clients to detect any potential credit risk problems.

Fees: Typically 1% to 1.75% of the invoice amount. Additional fees for delayed payments
Personal Credit Score Standards: Companies that are invoiced will be credit vetted. Business owners issuing invoices credit profile is not evaluated.

5. Purchase Order Financing

Purchase Order (PO) financing does not require any cash out of the pocket. It is a short-term finance option that provides the ability to raise capital to pay suppliers upfront for verified purchase orders. The advance frees up cash flow. This process can finance an entire order or a portion of it, depending on the purchase order and scenario. At the time when a supplier is ready to ship the order, the supplier will request payment. The purchase order financing company advances the capitalto the supplier and then collects payment directly from the customer. The purchase order funder then will subtract their fees and sends the balance of the invoice, so they act both as an advancing company and collection company.

Rates: None
Terms: No term limits
Fees: Each Purchase Order will cost between 1% to 5%
Personal Credit Score Standards: All types of credit profiles considered. All business owners’ credit involved in transactions is evaluated.
Processing Time: Once relationships are set up for Purchase order financing, advances and collections can occur daily. It takes a few days to set up a purchase order financing relationship.
Time in Business: No time in business requirement

6. Business Line of Credit for Bad Credit

A Business line of credit is a revolving business financing option that allows company owners to draw funds when needed on-demand or make purchases up to a certain limit. A line of credit is not a term loan. Business lines of credit are not open-ended forever and require renewal either semi-annually or annually to be extended. Of all the funding products we’re discussing, lines of credit will be the most difficult to get approved for as it does entertain fair to subprime credit, but does not go as deep into lower credit as other options mentioned. So, if you’re considering a line of credit for your small business, it’s important to know if you’re eligible because lenders are far harsher in their requirements related to the line of credit. Business lines of credit offer incredible opportunities, but the requirements can be stringent. It’s an extremely flexible option for small business owners, which can be a huge benefit to your businesses. If you’re looking for flexibility and improved cash flow out of bad credit business loans, a business line of credit is a great choice — but it’s not a great option for a large loan amount as the limit will be restricted and approval is more difficult to achieve. Lines of credit are great for cash flow needs!

Line of Credit Product Overview

Rates: Factor Costs 1.09% up to 1.28%
Terms: Open revolving line of credit, renewed annually semi-annually to annually
Fees: Origination Fees range from 0% to 3%
Payments: Monthly, Bi-Weekly or Weekly payments
Personal Credit Score Standards: All types of credit profiles considered.
Processing Time: Same day to up to a week depending on lenders
Time in Business: No time in business requirement

7. Business Credit Card for Bad Credit

A business credit card with bad credit can be offered to a business owner but it will have to be secured by cash as a deposit against the credit limit. A credit card is a revolving line of credit with a set limit. With a secured credit card, you have to start with a small limit ( as little as $300) but can be built up over time into the thousands of dollars with good pay credit history. Credit cards have an easy application process requiring only a one page application to process. Expect a higher percentage rate than normal credit cards.

The fast, convenient and straightforward way to get the money you need for your business – now! Get Your Quote Today by filling out our simple form.

What Are Considerations for Business Loans for Bad Credit?

How Do Lenders Offset the Risk of Offering Bad Credit Business Loans?

There are a variety of factors that contribute to your eligibility to get a business loan with bad credit.

Personal & Business Credit – Personal credit scores play a vital role in the credit decision process. The track record of managing personal credit obligations has a direct correlation to how they will manage credit, especially with their small businesses. Along with personal credit score, the business credit score is also evaluated for payment histories with vendors, liens, judgments, and State or Federal tax obligations that may interfere with the lenders’ ability to collect. We always recommend you make an effort to improve your credit score.

Annual revenue – Annual revenue activities play a role in the decision, including but not limited to; the amount of revenue, the frequency of deposits, the average daily balance, and cash reserves in the business bank account. This information helps loan underwriters determine risk. The minimum amount of revenue required to keep businesses open also can present a risk if the deposits are a low amount overall on a monthly basis, depending on the industry, which may be viewed as higher risk. Make sure you monitor how much cash reserves in your business bank account as it may mitigate the concerns of lending to someone with poor credit.

Profitability – Just because businesses have revenue coming in as discussed, annual revenue does not tell the full story. If the expenses are greater than the deposits, it’s going to be hard for a small business to survive, no matter if it’s a million dollars or $15,000 in deposits, the expenses out the way that there’s going to be problems, that’s just common sense. The good news is that although profit and annual revenue are evaluated, there are funding products that can still fund small businesses that temporarily aren’t showing a profit in their annual revenue breakdown. Lenders mitigate this risk by shortening the repayment term and increasing the costs of a funding product.

Industry Type – The type of industry definitely plays a role in the credit decision. No two industries are created equal, and they have their unique ways of operating. Some industries are inherently more risky than others. Through data collection and analysis of delinquency and defaults, credit underwriters can determine high-risk industries and set programs and term options that mitigate that risk against the less than perfect credit score.

Business Bank Statement Health (Cash Flow) – As the old saying goes, cash flow is king in business lending (well, it’s close). Business Bank statements are the first place lenders look to gauge cash flow and any stresses in annual revenue versus expenses in the company. Underwriters look at the consistency of deposits from sales, the number of deposits, average daily balances, available cash reserves compared to monthly expenses (debits).

Financial Statements – Many lending products that consider a low credit score DO NOT look at financial statements to render a decision, but if the financial statements are positive, it may be worth providing as it can be a great compensating consideration to overcome bad credit concerns. Financial trends are used to evaluate creditworthiness. Tax returns, recent profit & loss, and balance sheet accounts receivable and payable reports can tell a full picture that allows lending underwriters to evaluate risk against poor credit score borrowers.

Current Debt Obligations – Existing debts are evaluated as part of the loan underwriting decision. If a debt consolidation can be made, this fact could be a great mitigating factor to approve a potential borrower with a poor credit score for funding because the approval puts businesses in better financial standing for a monthly payment (debt) perspective.

Things to Consider When Applying for a Small Business Loan with Bad Credit:

What Are the Pros and Cons of a Bad Credit Business Loan?


  • Access to Working Capital – Instead of being declined by traditional “best business loans,” funding can be achieved with alternative lenders for working capital or other needs.
  • Fast Processing Times – These fundings are processed and funded in as little as the same day.
  • Reduced Documentation – Compared to traditional business loans, these loan options require less documentation than traditional business loans, which eliminates potential declines.


  • Interest rates will be higher than that of traditional business loans
  • Fees may cost more than traditional business loans (but not always the case)
  • Term will be shorter in the duration of time to repay
  • May not offer the same flexibility traditional business loans can
  • Loan Amounts and access to the amount of capital may be reduced

What Are the Most Common Reasons to Acquire a Business Loan When You Have Bad Credit?

  • Emergency loans
  • Working Capital Loans
  • Cash Flow shortages
  • Expansion Loans
  • Advertising/Marketing/Customer acquisition
  • Equipment Loans

What to Consider in Terms of Costs and Fees for Bad Credit Business Loans

Beyond the principal amount, funding often includes additional costs you must consider whether it’s a line of credit or loan. Rates and costs are always a consideration in any decision to fund businesses regardless of credit score. Bad credit business loans are no different, which means it’s important to take a close look at the repayment options.


Interest Rate – Principal & Interest rate expressed as an annual percentage rate (APR)

Factor Rate – Flat fixed cost of funds, which is not principal and interest, and does not have an APR.


The following fees do not always apply and are not always required to secure fundings with a poor credit score. Always review the disclosures of all proposals and discuss fee options.

  • Origination Fees (Points)
  • Underwriting Fees 
  • Processing Fees 
  • Application Fees
  • Closing or Funding Costs 
  • Wire Transfer Fee 
  • Servicing Fees (Additional Fees post-funding)
  • Draw fees (common with a line of credit) 

What to Consider in Terms of Costs and Fees for Bad Credit Business Loans

Beyond the principal amount, small business financing terms often include additional costs you must consider whether it’s a line of credit or loan. Interest rates and costs are always a consideration in any decision to fund businesses regardless of credit score. Bad credit business loans are no different, which means it’s important to take a close look at the repayment term options.


Interest Rate – and interest rate expressed as an annual percentage rate (APR)

Factor Rate – Flat fixed cost of funds, which is not principal and interest, and does not have an APR.


The following fees do not always apply and are not always required to secure fundings with a poor credit score. Always review the disclosures of all proposals and discuss fee options.

  • Origination Fees (Points)- – Costs deducted from the closing of funding of a loan due to risk factors
  • Underwriting Fees – Costs deducted at closing or funding for the processing of loan applications.
  • Processing Fees – Costs deducted at closing or funding for the processing of loan applications.
  • Application Fees – Costs paid upfront to make an application for a loan with low credit regardless of approval and funding (NOT RECOMMENDED!)
  • Closing or Funding Costs – Costs deducted at closing or funding for the processing of loan applications.
  • Wire Transfer Fee – Costs deducted at closing or funding for the transfer of funds
  • Servicing Fees (Additional Fees post-funding) – Fees charged to cover costs of servicing the funding such as monthly fees, late payment fees, penalties, and legal costs for violating the agreement, collection fees, or prepayment penalties. These fees may or may not apply to your specific funding product. Check your terms and conditions of any funding agreement and disclosures before you sign.

How to Avoid Being Taken Advantage of by Business Lenders Because You Have Bad Credit

  • Evaluate the expertise of loan originators for product knowledge and experience.
  • Determine a variety of product offerings – Ask yourself if the loan originator as a diverse amount of business finance product offerings.
  • The process – Ask how the application, underwriting, and funding processes work. How quick and/or efficient is the process?
  • Check Reviews – Search review sources with independent third-party companies that don’t work directly with companies -like Better Business Bureau and Google. Trust Pilot is not reliable because they work directly with businesses and are compensated for their review services.
  • Review Agreements, Fee Disclosures, and Term Sheets-Always require loan originators to provide with any funding quotes an agreement, fee disclosure, and/or term sheet with any and all terms and conditions.
  • Cost or origination fee-Review and consider all costs associated with the funding transaction.
  • Time to consider offers and Quotes and Comparison Shop-Any reputable loan originator will give you a reasonable amount of time (a week is typical) to consider any funding offer.

What Types of Lenders/Providers Offer Business Loans With Bad Credit?

Market Place Business Loan providers – These providers are the largest network of funding products of any entity.

Business Loan Brokers – Many brokers specialize in helping those with a bad credit score and have unique funding products to offer with an array of options.

Online Business Lenders (Fintech) – Online lenders may be able to help provide funding for those with bad credit, but the limited product lines may not offer the best choice. Always compare offers with other online lenders if choosing this route.

Invoice factoring Companies – Invoice factoring is a unique option for those who invoice their clients as a part of their operation. The business owner’s credit score is NOT evaluated. The clients who are invoiced is evaluated because that is where the collection of funds is coming from in invoice factoring. Fees are low for invoice factoring well, providing an attractive alternative for those with a bad credit score.

Hard Money/Private Lenders – This type of lender can provide unique opportunities because it is common for lenders of this type to use personal and business collateral as compensating factors to lend.

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Frequently Asked Questions (FAQ) About Business Loans With Bad Credit

Are Bad Credit Business Loans difficult to obtain? Can I get a business loan with bad credit?

It is not difficult to find a funding option if the owner has a less than perfect personal credit score. Keep in mind that banks don’t offer these types of funding products so bank loans are not an option. You have to go online to find funding originators who offer these products. Certainly, some choices such as a line of credit may be more difficult to obtain, and your business credit history could affect your choices. It can be more difficult for startup companies. It’s no secret that a startup has less history for lending institutions to go off of, so startup entrepreneurs may have limited options, but there are always options.

Can I get a small business loan from my business bank if I have less than perfect credit?

You cannot get a business loan for businesses with bad credit at traditional banks or credit unions if your credit profile isn’t up to par. You will have to find alternative business originators who are alternative lenders. AdvancePoint Capital has a variety of financing options for bad credit small business loans.

Should I pay any fees Up-front or separate outside of funding fees to a Business Loan Provider?

We NEVER recommend you pay up-front fees poor credit or not. You DO NOT need to pay for upfront fees to get most loans and other financing products, regardless of your credit history. Keep in mind, funding and/or lenders will charge fees that are deducted from proceeds at the time of funding. Make sure to always check the terms and conditions of all funding you are considering.

Can I qualify for business loans for bad credit if I have a Co-Signer?

Most funding decisions by lenders will be made by looking at the majority of all business owners. Adding additional non-owners as co-signers, in most cases, will not improve the chance of getting financing for your business.

What business loans can I get with a 500 credit score?

It is not commonplace to find business loans with poor credit scores below 500, but they do exist, and online lenders like AdvancePoint Capital have them!

What is the minimum credit score eligibility requirements for a business loan?

There are minimum credit score eligibility requirements for different business loan products, but they vary greatly depending on the type of financing products. All credit history types are considered at AdvancePoint Capital, with the exception of no credit at all. Less than perfect credit can certainly limit options, but even with a low credit profile, small businesses can get the funding they need.

Do I Need Business Credit to get a Loan?

Some products do not require past business credit history; some products do. Check with your business loan originator for funding options with no business credit score.

Does the Small Business Administration offer a business loan with bad credit?

The short answer is NO.

Is a business credit card an option for bad credit small businesses?

Like a personal credit card, a business credit card will require good to excellent credit and will only provide business financing if capital is put up for security. Business credit cards also are issued by the bank you do business banking with or a specialty bank. Outside banks do not normally offer business credit cards unless they control your business bank operating account. Make sure to check the interest rate as it will be higher than normal.

Advice, Tips, Warnings About Bad Credit Business Loans

Getting bad credit business loans for business owners struggling with their credit score these day’s is a lot easier than it used to be. There are some really interesting new bad credit business loans and other financing options to access capital for their businesses. These unique product structures provide small business owners access the capital they may not otherwise get approved for by traditional lenders. Business loans for bad credit are far and wide if you know where to look for loans. With such a wide range of small business loan opportunities, it can be difficult to find the best business loan options that work for you.

However, the business owner still must ask the key questions when getting business loans for your business. Make sure you ask yourself; What is my cost vs benefit analysis look like? Can I make more than it’s going to cost me for this money? What are the long-term benefits of accessing this capital for my business? Are the costs, fees, and terms worth it?

If you ask the tough questions of yourself as the business owner and you are comfortable with your answers, then these bad credit business loans can be an excellent source to help your business grow!

How Can I Get a Small Business Loan With Bad Credit and No Collateral?

Loan Options From Advancepoint Capital: Compare, Choose, and Save!

AdvancePoint Capital offers an easy experience for obtaining bad credit business loans. Our customers love the fast, streamlined process and high approval rates that come from working with us. All credit scores are considered. Our marketplace consists of some of the best online lenders in the industry. Let us help you find the best bad credit business loans.

Applying for a loan with AdvancePoint Capital is as simple as a 1, 2, 3, 4 process.

Start with this online form, then fill out the short 1-page business loan application, wait a few hours for your approval, and then get your money!

The fast, convenient, and straightforward way to get the money you need for your business – now!

Make sure to Get your Quote Today by filling out our simple form.

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* All loans made by either WebBank, an FDIC-insured Utah industrial bank, or Bank of the Internet Federal Bank, an FDIC-insured federally chartered thrift located in California. In connection with the loans, the Banks' underwriting conditions and terms apply.