Small Business Loans for Bad Credit
Find the Right Small Business Loan for You
Types of Small Business Loans You can Get with Bad Credit
- Cash advance loans
- Working capital loans
- Business credit loans
- High-risk business loans
- Bankruptcy loans for businesses
Small business owners can expect to go through periods of time where the cash flow account is low. Having a plan to deal with these inevitable downturns is critical for any long-term planning. Lines of credit are essential for most business, and this is a good way to secure financial solvency.
However, you’ll never be able to secure a line of credit or small business loan if you and/or your business have a lackluster credit score. Your credit score reflects how much of a risk you are to your lender, and thus is a large part of determining whether or not to approve your loan.
Every person has a credit score that reflects how they’ve handled credit and loans in the past. In the same way, every business has a credit score that reflects the same information. While these scores are calculated slightly differently and use a different score range, they are both important when it comes to securing funding for your small business.
Sometimes things happen and your credit score, or the credit score for your business, suffers as a result. This doesn’t mean that you aren’t able to run a business or manage money, but it does make it difficult to get financing for your business when you might need it the most. You may be wondering if any lenders provide business loans for bad credit. The difficulty of obtaining a loan with a poor credit history will be dependent on the individual lender.
Don’t let your borrowing history deter you from exploring your financing options – getting a business loan with bad credit isn’t impossible if you approach the process correctly. This post will discuss what to do when you need a small business loan but have a bad credit score. In addition, it will provide you with practical information on how to get a business loan with bad credit.
How Credit Lenders Can Help
Access to credit is essential for small businesses who are going through the normal ups and downs of the business cycle. The process of owning a business can be time-consuming, and it is easy to allow long-term financial planning to slide. However, it only takes a few slow seasons to bring the business to the point of failure.
Any long-term business planning should include some back-up options for gaining access to a short-term line of credit. The best business owners always prepare for a range of scenarios when it comes to financing – not doing so can leave your business in a dangerous position should capital suddenly be needed for an emergency or additional investment.
Lines of credit, or revolving credit, work like a credit card. In fact, they frequently take the form of credit cards. These financial products allow a business to use the credit offered by their financial institution instead of the business’s cash on hand for making purchases and payments. Some lines of credit will even let you take a cash advance to do things like cover payroll that you can’t normally do with a credit card.
Each lending institution will use a different set of judgments to determine if your business is worth the credit risk. Having bad credit will not disqualify you from every loan, so you need to carefully review the terms and conditions of each loan offer on its own merits. Some lenders might place a lot of weight on the FICO score, for example. However, other lenders might be more interested in the current financial health of your business.
The advantage of the modern lending system is that there are hundreds of different lenders with varying standards of what they believe to be a business loan with bad credit. As a practical measure, you should always obtain a current and complete set of financial statements before pursuing any loan that uses the revenue generated from your business as collateral on a small business loan.
Once you have the appropriate documentation, you can begin to determine what the best lending options are for your small business. Individuals and businesses with excellent credit scores can gain access to lower interest rates and better terms. However, those with subpar scores will find their options limited, and should expect higher interest rates. That’s one of the reasons why lines of credit are a good idea for businesses with bad credit. You only need to borrow the exact amount you need, rather than having a large loan payment every month. This means that if you aren’t facing any hardship you can avoid accruing debt, but you have credit available if times get tough.
Knowing Your Options When You Have Bad Credit
Small business owners who have bad credit scores may also have difficulty getting access to credit when it is needed. For some businesses, this critical period of time can determine whether the business is able to remain viable. Planning for a difficult season is important for businesses because of the high failure rate. This is especially true during the first five years, which is a period when most businesses fail. If you have a source of back-up credit, you can get through this vulnerable period without going bankrupt or going out of business.
It is important to be realistic about your situation – you won’t be able to receive premium finance options if you have a checkered recent past. For example, it highly unlikely that you will be able to get an unsecured business loan with bad credit. But this isn’t to say there aren’t a range of different options form small business loans with bad credit.
Understanding all of the available options can make a difference for individuals or business owners who have bad credit. There are several kinds of small business loans, and some of them do not require the owner of the business to maintain a high credit score. Always read the conditions or agreement terms of any lender before signing onto the loan. If you have doubts about the credibility of the loan offer, you should always check with your legal advisor to look over the terms of the loan offer to ensure that it is coming from a valid source.
Here is a short list of some of the most viable small business loans. They can be applied even when you have bad credit, but you should always check with the loan provider first:
- Cash advance loans:Cash advance loans are one of the fastest methods of gaining access to credit for individuals or business owners who have a bad credit history. These loans do not typically require any form of collateral, and you only need to show proof of income and identification in order to qualify.
- Working Capital loans: This is a type of loan that is only offered to businesses, and it is based on the ability of the business to generate future revenues.
- Business credit loans: These lines of credit are available to any business entity that meets the threshold requirements set by the lender.
- High-risk business loans:Business loans are also available for companies with a tainted credit record, but the interest rates will probably be high.
- Bankruptcy loans for businesses: Consider a bankruptcy loan for your small business if you exhaust all other options
Credit access is available for business owners who do not have perfect credit because lending institutions have the discretion of evaluating each borrower based on the current assets and liabilities. This can minimize the impact of previous credit problems. There are many options for businesses who have credit problems. There is a good reason to consider using a small business loan for your credit needs, and this option is often available if your business has a history of a good revenue stream.
One option for individuals and businesses that need to take out a small business loan but have a less than perfect credit history is to undergo a credit repair process. There are many different companies that offer credit repair services for both individuals and businesses. These services can include drafting letters of goodwill the creditors that have entered negative information on your credit report, challenge negative and inaccurate information, request verification on entries, and more.
The goal of all of these steps is to reduce the number of negative entries on your credit report, thus increasing your credit score. The items can be removed by the institution that issued them, and this is accomplished by writing a letter of goodwill
A letter of goodwill is a request to your lender to remove negative information on your credit report. This strategy relies on a track record of on time payments since the last time you were late to demonstrate that you don’t warrant the mark against your record. It is up to your creditor whether or not to take any action on your letter of goodwill.
Another option for improving your credit score is through verification requests. Federal law stipulates that any negative information on a credit report has to be 100% accurate, or it should be removed. If a credit reporting agency attempts to verify information with a lender and the lender cannot prove that the information entered is accurate, then that information has to be removed, boosting your credit score
In addition to letters of goodwill and verification, credit repair services can also file disputes on your behalf. A dispute is an active challenge that the information on your credit report is not accurate or does not belong on your report Disputes are a great way for people who have experienced identity theft to reclaim their financial records and credit score. Remember, one of the quickest ways to increase your chances of getting a bad credit small business loan is to actually invest time in improving your score. Make sure to explore all the methods mentioned in this section to ensure that you don’t miss an opportunity to quickly improve your credit score.
Best Solution for Bad Credit Small Business Loans
There is no one best solution for small business loans for individuals or businesses with bad credit. Each case is different and you’ll have to determine the best path forward for your business.
If you need money now then you might have to take out a high-interest short term loan to keep your business going, and work on your credit score in the meantime. If you don’t have an urgent need for cash but want to have the resources on hand in case the worse happens, then you should start to take credit repair steps to boost your credit score with an eye toward getting favorable terms on a business line of credit.
In addition to getting you better terms on lines of credit, boosting your credit score will also get you better terms on any small business loans you might seek in the future to grow or expand your business. After all, being confident that you can get the capital you need allows you to take bigger moves when it comes to growing your business. Having the cash on hand to take advantage of an unforeseen opportunity or to get through an unforeseen setback gives you more confidence when conducting business.
At this stage you should have a better understanding of how to get a small business loan with bad credit. In short, there is no one solution that works for every small business that suffers from bad credit. You should investigate your needs and compare them to your options to determine what the best path forward is for your small business.
You should also keep in mind that you can combine several of the options discussed in this post to get even better results. Taking out a short term but high interest loan and paying it back will boost your credit score, as will credit repair efforts and paying back lines of credit, so don’t limit yourself, or limit your business. Bad credit business loans are not impossible to attain – but you should make sure to do the necessary work to put yourself in a position to receive small business funding.
Whether you are a veteran or new-comer, starting and financing a business with bad credit can be challenging. To help you out, we created our very own Frequently Asked Questions, which is based-upon what other business owners, like yourself, are asking. Take a minute and stroll through to find answers to dozens of questions you might never knew to ask!
Starting a Business with a Bad Credit
When it comes to starting a business and needing a small business loan, here are some of the many questions that new business owners are asking.
How do I get a small business loan with bad credit?
Can I get a start-up business loan with bad credit?
There are different factors that can impact whether or not an individual can open small business startup loans if they have bad credit. For example, if you have missed numerous payments, it challenging to find a lender willing to trust or invest their financial capital in them. If you have bad credit from lack of credit history, there may be lenders who are willing to work with you.
Where can I get a small business loan with bad credit?
Do you need good credit to start a business?
Is it hard to get a small business loan?
How easy is it to get a small business loan?
Can you get a small business loan with no credit?
Can you start a business with no money?
Can you start an LLC with bad credit?
How can I get a startup business loan?
How to get a loan to start a business with bad credit?
How to get a start-up business loan with bad credit and no collateral?
How to get a loan for your first business with bad credit?
How can I qualify for a start-up business loan with bad credit?
How do I get pre-approved for a small business loan with bad credit?
Small Business Loan Credit Score
The relationship between business credit scores and small business loans can be tricky. We’ve answered the questions that many small business owners are asking below.
What credit score do you need to get a business loan?
There is no distinct number to which an individual has to have in order to open a business loan. There is an assortment of different lenders, all catered towards helping individuals across an assortment of credit score brackets. If you are looking to open an optimal business loan, one with minimal fees and great rates, you should aim for the mid 700s.
Can I get a business loan with a 600 credit score?
While 600 is still qualified as a bad credit score in the eyes of FICO, business owners should not be discouraged. In optimal situations, you should try to be in the mid-700s for an optimal business loan. If your credit score is 600, do your research to ensure the lender is accepting of individuals with lower or bad credit scores. Reason being, most lenders view this score range as a risk.
How much of a loan can you get with a 600 credit score?
There are many different factors that can influence how much of a loan an individual can get with a 600 credit score. For example, it depends upon the lender or if you put anything on the loan as collateral.
Can you get a personal loan for a business with a credit score of 550?
While we cannot say whether or not an individual will get approved with certainty – what we can say is that there are lenders that specifically work with individuals with a low credit score. In many cases, individuals will a credit score of 550 could get approved for a personal loan for a business – but it may require collateral.
Can I get a business loan with a 500 credit score?
Yes. Even though your credit score is 500, there are still different companies and lenders that are willing to help you. It’s highly advised to be aware of the different rates, terms, and fines that come with these types of loans. Reason being, lenders will view someone with a credit score in the 500s as a risk, resulting in abnormally higher rates.
General Small Business Loan
If you are serious about opening a small business loan, it’s important to ensure every one of your questions are answered. Check out what fellow business owners are asking below!
Can you get a business loan with bad credit?
Yes. Utilizing the FICO credit score system, bad credit is deemed between 300-629. Evidently, the higher the credit score the better; however, an individual may open a business loan even if they have bad credit. The lower the credit score, the higher the interest rate and fees will be, which can further harm an individual’s credit score if they fail to make on-time payments.
Can I get a SBA loan with no money down?
Yes. There are circumstances where an individual can open an SBA loan with any money down. Typically, those who have extraordinary credit will find minimal conditions for getting approved. In other cases, lenders may ask business owners for collateral to open an SBA loan without any money down.
Which banks give small business loans?
Typically, all banks will offer small business loans. If you are curious to know whether your favorite banking institution offers small business loans, visit their website or call a local branch.
How can I get a small business grant?
There are many different ways that business owners can get a small business grant. Many people are often unaware that there is an assortment of government agencies that will financially support business owners. To get a grant, find an agency, review their eligibility requirements, and apply!
Can business debt affect personal credit?
If you are not careful when opening-up business lines of credit, it can impact your personal credit. It’s highly advised to develop a formal and legal business structure prior to getting any business debt.
Is business credit and personal credit the same?
Business credit and personal credit are not the same. Business credit is associated with the business as a whole whereas personal credit is per individual.
Does business credit affect personal credit?
Business credit and personal credit are much different; however, if you are not careful when establishing your business, business credit can impact personal credit.
How can I build business credit fast?
The best way to build business credit is through constantly paying your monthly statements on time. Additionally, by opening a business credit card, legally registering your business, and carefully monitoring the business’ credit report, a business owner can help their business credit to soar.
What is a good business credit score?
When it comes to business credit score, it operates a bit differently than personal credit scores. A good business credit begins ranges between 76+ to 90+, depending on the credit bureau.
How can I check my business credit?
Similar to that of a personal credit score, business owners can keep track of their business credit score by staying up to date with the credit bureaus. Do keep in mind, the major business credit bureaus will charge business owners for checking their scores.
How can I get a business loan without collateral?
If you are looking to get a business loan without collateral, you will need to approach the lender with a concrete business and financial plan, alongside an impressive credit score.
Is an LLC good for a small business?
Yes! LLC can prove quite beneficial for small business owners. By going through the process, small business owners can protect their personal assets. Additionally, with an LLC, business owners can structure the company to have limited liability for the company’s debt.
How to get a business loan with bad credit and no collateral?
To get a business loan with bad credit and not have to put any collateral, the best thing you can do is focus on improving your credit score. So, pay down any debt that you may have and review your credit report to review its accuracies. Do know that there are lenders that specialize in offering business loans to those with bad credit.
How to get a loan to buy a business with bad credit?
If you are interested in purchasing a business but have bad credit, take the time to polish up your credit report as best as possible before applying for the loan. If your credit is well below 600, lenders may ask for you to find a credit partner or collateral for the purchase loan.
How to apply for a business loan with bad credit?
Applying for a business loan is no different, whether you have good or bad credit. Find a lender whos requirements you meet and then apply.
Where to get a business loan with bad credit?
Business loans are offered at banking institutions around the world. You can either search locally or on the internet. In this, there are different institutions that specialize in offering business loans for those that have bad credit.
How to qualify for a small business loan with bad credit?
One of the easiest ways of qualifying for a small business loan with bad credit is through collateral. Since each lender will have different requirements, it would be wise to try to improve your credit score prior to applying for a small business loan. Do know, a lower credit score will result in higher rates and fees.
How hard is it to get a business loan with bad credit?
Securing a business loan with bad credit is not as hard as many institutions make it seem to be. Today, there are numerous programs that are designed to help individuals with bad credit. Additionally, there are lenders that only offer business loans for those who suffer from bad credit.
How to get a VA business loan with bad credit?
Like that of regular business loans, there are numerous lenders that specialize in helping veterans secure a business loan if they have bad credit. Each company will have their own set of requirements. Carefully read these and ensure you meet each of them prior to applying. Additionally, pay close attention to the rates, fees, and the amount of money they are willing to offer.
How to get a small business loan with bad credit from my bank?
The first step to getting a small business loan with bad credit from your bank is to understand what their eligibility requirements are. Ask your bank as many questions as you can and ensure you understand everything that the loan will entail. Before applying, try to make progress on improving your credit score.
How does a woman obtain a small business loan with bad credit?
There is a myth that women cannot open a small business loan with bad credit. It does not matter whether you are a man or a woman. In fact, there are specialized programs that can help women obtain the loan they need to start their business. Focus on improving your credit score first and you may get a decent loan plan.
How to get a large business loan with bad credit?
If you are looking to open a large business loan with bad credit, it’s important to find a lender that specializes in helping out those with bad credit. Additionally, you should be prepared to place some heavy collateral to secure a large business loan.
How to get a small cash loan for business with bad credit?
To get a small cash loan for business with bad credit, you will need to find a lender that is willing to work with business owners with bad credit. Typically, most people with credit unions as they are a bit more lenient. Additionally, each company has their own eligibility requirements.
How can I get a free loan for my business with bad credit?
A free loan for a business is often known as a business grant. These are provided from governmental agencies, which can be found online. Each agency has their own set of requirements that you must meet prior to applying.
Can you open a bank account with bad credit?
It’s important to know that many banks will not perform a credit check in order to open a regular deposit or savings account. So, yes, you can open a bank account with bad credit.
How to get a $6000 business loan with bad credit?
The first step to securing a $6,000 business loan with bad credit is researching what lenders are available. Compare their offers and rates and see if you are eligible for their loans. From there, either visit the local branch or the company’s website to review the application. Be sure to try to improve your credit score as best as you can prior to applying!
How to get a $7,000 small business loan with bad credit?
Since lenders look at bad credit as a risk, it’s important to find a company that specializes in helping those with bad credit. Typically, these lenders will only offer short-term loans – at the expense of high-interest rates. To secure $7,000, compare different lenders and their options. Find out if you match their requirements and then apply.
How to get a $150k loan with bad credit?
To secure a $150k loan with bad credit, it’s highly advised to do some thorough research. Review different lenders, their eligibility criteria, and figure out what their offers look like. To ensure you get approved, it’s recommended to review your credit report to clean it up, if possible. Additionally, remove any outstanding debt, if possible.
Jason is a Senior Author for SBL. He has been working with small business owners like you for the past ten years. He graduated with an MBA and began a career as an independent financial consultant for small businesses in his state.