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If your credit isn’t great, getting a business loan from a bank or credit union may be difficult.
Business owners with poor personal credit are considered riskier, so available loans will likely be more expensive as a result. If you need a bad credit business loan, shop around to get the best terms possible and make sure the payments will be manageable.

So what exactly is considered “bad credit” — defined by FICO as a score between 300 and 629 — is considered by lending standards as “poor credit”

Can you get a business loan with bad credit?

It’s possible to get a business loan with bad credit if your company is otherwise in good shape. Lenders have different qualifications, and are likely to consider the following in addition to your credit score:What your annual revenue is.

• How long you’ve been in business.
• What your annual revenue is.
• How strong your cash flow is.
• Are your monthly sales consistent?

The reasons behind your low credit score may also influence a lender’s decision. For example, it will likely be harder to get approved if a recent bankruptcy or loan default is what’s dragging your score down.

How to get a business loan with bad credit

All successful businesses keep detailed records. By doing so, you will know where the business stands financially and

• Check your credit. Before applying for a small-business loan, check your credit to know what lenders are going to see. Many websites allow you to receive a one-time free credit report, just be sure to look around and read the fine print carefully. Business credit scores are available from Experian, Equifax and Dun & Bradstreet.
• Wait, if you can. If your credit score is lower than you’d like, consider ways to build it up before applying for business financing. For example, look for any errors on your credit reports and dispute them with the appropriate credit bureau. Other credit-strengthening strategies can include making payments more often and paying down or paying off debt, which can build your business credit as well.
• Shop around. If you need financing now, bad credit will likely mean you’ll have fewer options to choose from. But don’t let that stop you from shopping around. A low credit score may result in a high interest rate, which could make it difficult to repay your new loan — and leave you worse off financially than you started. By working to get the best deal possible, you’ll better position yourself for success.

Where to get approved for a business loan with bad credit

Banks and credit unions likely won’t approve you if you have bad credit. But these alternative sources may let you get a business loan with a spotty credit history:

• Online lenders. Most online lenders require a minimum personal credit score between 540 and 620. But a few have no minimum credit score requirement, focusing on factors like your business’s cash flow instead. Online lenders offer easier approvals and faster funding than other business lending options, but they typically charge higher rates — even for those with good credit. Be prepared to receive shorter repayment terms as well.
• CDFIs. A community development financial institution, or CDFI, receives government funding to provide banking access to low-income or underserved communities. CDFIs are often banks and credit unions, but don’t have the same strict credit requirements for lending those financial institutions have. If you’re eligible for CDFI financing, you could get a competitive interest rate. Funding can be slower than online lenders, though.
• Microlenders. If you have bad credit, you may be able to get a microloan for your business. Microloans typically come from nonprofits. Because profit isn’t these organizations’ primary driver, they may be more willing to work with business owners with a thin credit history. The downside of a microloan is right in its name: Funds typically top out around $50,000, which may not be enough for your company’s needs.
• Your business. Invoice factoring or financing can turn unpaid customer invoices into immediate cash and is best for business-to-business companies. While lenders may still check your credit score, approvals are based mainly on the value of your invoices. A merchant cash advance can also let bad credit borrowers tap into their own business for financing. But this kind of loan should be a last resort, as rates can reach triple digits.

If you’re a startup with bad credit

The key

If your company is less than a year old with little revenue, it’ll be tough to find a startup business loan — whether your credit is good or bad.

A few lenders offer startup business loans for bad credit, but these options can be expensive. That will also likely be the case for any startup business loans with no credit check or guaranteed approval. Be wary of such promises.

Potential alternative options include business credit cards, which typically provide borrowing amounts up to $50,000. However, approval is based on your personal credit score, and you’ll need a minimum credit score of 640 to qualify for most cards.

If you need to improve your credit score, consider getting a secured personal credit card first.

These cards require a cash security deposit when you open the account. But if you use the card responsibly, you’ll improve your personal credit and get back your deposit.

Compare more small-business loan options

If none of the loans included here works for you, or if you’d like to compare loan options, speak to one of Mint Financial’s funding consultants and receive a free consultation. We are always available to help you navigate through the ever-changing financing landscape

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