We analyzed a variety of business financing options, including loans from online lenders to SBA loans, all of which are open to those with bad credit. After conducting a deep dive of over 50 lenders, we've consolidated this list of the best options for businesses or startups with bad credit. While some of the lenders listed below may be easier to qualify for than a traditional lender, none of them are likely to guarantee approval. Lenders that don't prioritize credit score will look to other factors such as cash flow, age of business, and more.
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Best Bad Credit Business Loans for Credit Scores Under 500
There are only a few financing options for borrowers with personal credit scores below 500. Here, borrowers will unfortunately face the highest fees and rates. This can be slightly offset if borrowers can demonstrate strong cash flows or cash reserves.
Why we like it: Kabbage is one of the only lenders to not require a minimum credit score to apply. We do recommend that any businesses that do apply, be able to demonstrate a strong cash flow as Kabbage will place heavy weight on that when determining eligibility and underwriting the loan. Added bonuses we like about Kabbage are speed and liquidity. Kabbage can typically assess your application and make your funds available within the same business day that you apply. Also, they offer something called the Kabbage card, which allows for instantaneous access to one's line of credit.
Drawbacks: As mentioned before, lenient application requirements will usually translate to higher rates given the increased risk lenders are incurring. Kabbage is no exception to this as they usually charge a cost per dollar range of $1.20 - $1.80. Also, Kabbage may be limiting to some businesses as they only offer lines of credit that go up to $150,000. Additionally, Kabbage removes the incentive for borrowers to pay their balances off in advance by front loading their fees in the early months of the term.
Why we like it: Similarly to Kabbage, Fundbox does not require applicants to meet a certain credit score. This makes it one of the few options available to borrowers with very low credit scores. Fundbox has the advantage of providing a bit more product variety for those with low credit than Kabbage as it offers both invoice financing and a line of credit. Fundbox's invoice financing is also unique as borrowers receive a 100% advance on unpaid invoices while other lenders typically provide a 85% advance or so. Finally, Fundbox waives all remaining fees if a loan is repaid early with no prepayment penalties.
Drawbacks: Fundbox's borrowing limits can be restrictive for many businesses. With a borrowing limit topped out at $100,000 for both their line of business and invoice financing, many businesses might feel that the loan isn't enough to cover their needs. Also, keep in mind that Fundbox has a cost per dollar range of $1.10 - $1.79. This isn't as high as Kabbage's but it is certainly on the higher side even compared with other online lenders.
Best Large Loans for those with Bad Credit
Most business owners believe that loans designed specifically for those with bad credit tend to be smaller. However, there are a few exceptions. Some lenders make exceptions and typically require borrowers to secure the loan with collateral or they require borrowers purchase a blanket lien.
Why we like it: We strongly recommend SnapCap because they offer higher loan amounts, faster funding, and have more lenient requirements than other online lenders. Those with bad credit can still qualify for loans from $5,000 - $600,000, which is the largest range on this list. SnapCap also doesn't limit how the loan is used. Borrowers can also use the funds within 24 hours of approval making this one of the fastest lenders in the market. Additionally, SnapCap only requires a low credit score of 550, making this an easy option for most borrowers with bad credit.
Drawbacks: Although SnapCap's cost per dollar typically ranges from $1.20 - $1.50, rates can be higher depending on the borrower's credit score. Also, SnapCap may require daily repayments depending on the strength of your profile, which can be uncomfortable for many businesses. SnapCap does also prefer businesses with an annual revenue of $200,000, which is higher than most.
Why we like it: Funding Circle is another online lender where borrowers will find low rates. Borrowers will need to have a credit score above 620 but qualified borrowers will be able to enjoy a low cost per dollar range of $1.08 - $1.33. Funding Circle also allows for borrowers to make monthly payments, which some businesses might find a relief compared to the daily or weekly repayment schedules most online lenders use. Finally, Funding Circle offers relatively large loans with a range of $25,000 - $500,000.
Drawbacks: Funding Circle can fund loans 10 business days. This is long compared to other online lenders who can often fund loans within a business day or two. Also, borrowers might be excited to see the low rates and the relatively low credit score requirement of 620 but Funding Circle is stricter in other areas as it does require business be in operation for at least 24 months.
Best Bad Credit Loans for Startups
If obtaining a business loan with bad credit for businesses over a year old is limited, some might think that doing so as a startup that is less than a year old with bad credit is nearly impossible. However, there is still a mix of nonprofits and alternative lenders that do offer business financing for borrowers who fit that profile.
Why we like it: Accion is a nonprofit network that connects entrepreneurs with small business lenders. Rates will vary from $1.08 - $1.34 depending on the loan program you go through. To see what options are available to you in your area, visit here. Most lenders Accion works with requires borrowers have a credit score of at least 575 but some programs may not require a minimum. However, most applicants will be required to present a business plan with cash flow projections.
Drawbacks: Accion technically has a loan amount range of $300 - $1 million given all the different lenders they work with but most of the programs they work with only offer loan amounts of $15,000 or less, which may not be enough to get your venture started. One exception is the SBA Community Advantage Program through Accion, but you will need to fund at least 20% of the total costs. If you’re rejected from Accion, you will also need to wait at least three to six months before reapplying.
Why we like it: Startups with bad credit should also consider Upstart because the lenders offers loans of up to $50,000. Unlike some other personal loan lenders, Upstart does not place restrictions on how the loan is used so borrowers can use the funding to grow or start a business. Borrowers do need a credit score above 620 to apply. Additionally, their rates can be quite low as their average cost per dollar is $1.17.
Drawbacks: Upstart doesn't offer much flexibility with their terms and can range from 3 - 5 years. It does have a higher credit score requirement than most options through Accion, the other lender we'd recommend for startups with bad credit, so we recommend borrowers apply there if the 620 credit score requirement is a limiting factor.
Best Unsecured Bad Credit Loans
Unsecured business loans are those that don't require any liens or collateral. Getting an unsecured business loan can be difficult, even for borrowers with great credit. However, there are a few online lenders that offer unsecured business loans to applicants with bad credit scores. We've selected the clear leader amongst those few.
Why we like it: QuarterSpot provides larger loans than either most online lenders for borrowers with credit scores above 550. With a loan range of $5,000 - $200,000, borrowers will see more flexibility compared to most other online lenders.
Drawbacks: QuarterSpot's high cost per dollar range of $1.20 - $1.48 is nothing to ignore. While the the range is lower than one might run into with Kabbage or Fundbox, QuarterSpot still floats towards the more expensive end of the market. Also, businesses will need to demonstrate $16,000 in monthly revenue or $200,000 in annual revenue, which can be difficult for many small businesses. Additionally, QuarterSpot can potentially require daily repayments depending on your borrower profile, which is very frequent compared to other lenders.
Why we like it: LendingClub doesn't require collateral for loans less than $100,000 and has one of the largest loan amounts available with a range of $5,000 - $300,000. LendingClub also doesn't require a minimum credit score but it does prefer if borrowers have credit scores above 620. On top of all that, LendingClub is one of the few lenders to offer a monthly repayment schedule.
Drawbacks: LendingClub has one of the slowest funding times out of lenders we've reviewed as borrowers can receive funding within 7+ business days. Business owners who require fast cash might not find LendingClub to be appropriate for that reason. Additionally, LendingClub requires businesses be at least two years old while some other lenders only require one year of operations.
Great Loans for Small Businesses with Bad Credit That Didn't Make the Cut
There were quite a few lenders and financing options we really liked but didn't make it onto our list above. Take a look below if you'd like to browse other options:
Why we like it:: OnDeck offers some of the largest loans other than SnapCap. Borrowers can borrow anywhere from $5,000 - $500,000. Those with bad credit will also be pleased to see their lenient credit requirement of 500. OnDeck also reduces their origination fees for each subsequent loan so that by the time you take out your third loan, there are no origination fees.
What kept it off our list: OnDeck has higher rates than other lenders, especially since businesses with bad credit are likely to qualify for their highest rates. Their cost per dollar ranges from $1.10 - $2.00. Additionally, OnDeck claims they have a prepayment "discount" but we'd actually classify this as a prepayment penalty. If you pay off your term earlier than the maturity date, you'll still need to pay the remaining fees with a discount.
Why we like it: StreetShares has one of the lowest range of fees and rates for borrowers with a credit score above 600. With a low cost per dollar range of $1.08 - $1.40, StreetShares offers some of the best rates one will find outside of a traditional lender. This is true of both their line of credit and term loan. Additionally, military veterans usually receive a discount of 2 - 3%. Finally, StreetShares only requires borrowers demonstrate $25,000 in annual revenue, which is the lowest revenue requirement we've seen making StreetShares ideal for those with bad credit and low annual revenue.
What kept it off our list: Borrowers who need large amounts of working capital might find other lenders to be better fits. StreetShares tends to not lend amounts greater than 20% of a borrower's annual revenue, which is limiting for many small businesses. Additionally, their line of credit and term loan both have a range of $2,000 - $100,000, which is smaller than many other online lenders' we reviewed.
How to Choose a Business Loan When You Have Bad Credit
Qualifying for a business loan when you have bad credit can be difficult but not impossible. As shown above, there are plenty of lenders willing to overlook bad credit if you are strong in other areas like cash flow. Traditional lenders like credit unions and banks prioritize credit scores in their applications so you likely won't be able to qualify if you have a credit score below 700.
Most businesses will find their financing needs best met by term loans, business lines of credit or business credit cards. These three products will usually provide the most flexible spending terms and options. If you can't qualify for a term loan or business line of credit at a bank because you have bad credit or don't have the cash reserves, apply for one from an online lender as they emphasize cash flow over cash reserves. If you cannot qualify for one from an online lender, seriously determine if you'd be able to pay back any loan you take out. In most cases, we'd recommend instead focusing on increasing your personal credit score or solidifying your cash flow.
Business owners who cannot qualify for the aforementioned loans but still need funding should consider a merchant cash advance or invoice factoring. They are easier to qualify for but be wary of the high costs that often come attached. It is extremely difficult to qualify for affordable rates with these products, and they are also known for sending borrowers into debt spirals because of the high expenses. We only recommend these loans as last measures.
Be wary of advertised fees and expenses, and try to compare different loans apples to apples. Unfortunately, regulations around small business loans are sparse at best and standardized costs aren't enforced. Many lenders, especially online lenders, like to use different types of rates and fees that really make it difficult to compare different loans side by side. Rather than solely relying on the costs lenders communicate, we converted all rates into costs per dollar.
For a more in depth comparison of the different financing options, take a look here.
Traditional vs. Online Lenders
Many small-business owners default to seeking financing from traditional lenders like banks and credit unions given how ubiquitous they are and how low their rates can get. However, those traditional lenders are typically the most difficult to qualify for. For those of you with bad credit, traditional lenders will likely be out of reach.
If you do not qualify for financing from a bank or a credit union, you still have the option of online lenders. Online lenders will typically have lower application requirements but higher fees and less attractive terms. This is a given as these lenders are incurring higher risks given the more lenient requirements they're setting for applicants. Online lenders also have the benefit of often providing faster funding times and simpler applications. This can be crucial for small businesses who need funding quickly.
One thing we don't recommend borrowers do is settle for a single quote from a single lender. Take your time to shop around and measure your options. The underwriting process differs from lender to lender, so even if you qualify for an expensive loan from one lender, another might give you substantially better rates. One word of caution is to be wary of lenders who perform hard pulls if they check your credit score. This will negatively impact your score and will also affect the loan you can qualify for with other lenders. Most lenders today will only perform soft pulls, which don't negatively impact your score, but we'd still recommend double checking.
You should always compare loans side by side and make sure you compare apples to apples. Some lenders use annualized interest rates (AIR), others use APR. If you can, have a lawyer review you loan contract before signing. You'll want to look out for hidden fees or terms that are different than previously communicated.
Is a Small Business Loan Right for You?
Every business needs capital to grow. Ideally, capital would always originate internally from retained earnings but if that's not the case, businesses need to consider external funding. You'll need to decide what form of financing you want to pursue, whether it's venture capital, crowdfunding, small business loans, etc. Each path will have different pros and cons as they're all substantially different financing methods in nature. You'll need to compare each option side by side and decide which is right for you.
You'll also need to assess a projected ROI of the loan. There are very few instances where we'd recommend taking out a loan if your loan's costs will be heavier than the projected benefits.
Improve Yourself as a Borrower
Even if you decide to borrow from an online lender, we fully recommend you use the term to improve your credit score. Just because you have bad credit now, it doesn't mean you necessarily need to have bad credit forever. Improve your credit score so that subsequent loans come with cheaper rates and fees. Eventually, you'd want your credit score to be high enough so that you qualify with a traditional lender.