How to Get a Business Loan With Bad Credit

What 'bad credit' actually means to a lender

Most small business lenders weigh two separate scores: your personal FICO score and, for many but not all loan types, your business's own credit profile, commonly the FICO SBSS score used by the Small Business Administration and many banks. A personal score below roughly 620 is the practical line where SBA 7(a) loans and most bank term loans become very difficult to qualify for, though it is not always a hard automatic decline.

Business revenue and time in business matter more than most owners expect. A lender evaluating a two-year-old business with $30,000 in monthly revenue and a 580 personal credit score is looking at a fundamentally different risk profile than a brand-new business with the same score and no revenue history, and several of the options below are built specifically around that revenue-first evaluation.

SBA Microloans: the most accessible SBA path

SBA Microloans, funded up to $50,000 through nonprofit intermediary lenders rather than banks directly, carry meaningfully looser credit requirements than the SBA's larger 7(a) program. Many microloan intermediaries accept scores in the 575 to 620 range, and some will consider an application as low as 540 to 575 when the business shows strong offsetting factors: consistent monthly revenue, low existing debt, real business experience, or a credible business plan.

The trade-off for that flexibility is loan size and speed. A $50,000 cap and nonprofit-intermediary underwriting means the process usually takes longer than a same-day online lender, and the average SBA Microloan lands closer to $13,000 than the $50,000 ceiling. If your capital need fits inside that range, a Microloan is worth applying for before turning to a more expensive alternative lender, since the rate is typically far lower than what a revenue-based or merchant cash advance product will offer at a comparable credit tier.

Financing that weighs revenue over your credit score

If your credit sits below the Microloan floor, or you need more than $50,000, several financing types are underwritten primarily on business cash flow rather than personal credit. Invoice factoring sells your unpaid B2B invoices for cash now, and approval leans on your customers' creditworthiness, not yours, which makes it accessible even to a business owner with damaged personal credit as long as the business itself invoices other companies. A business line of credit from a fintech lender can also work at a lower credit tier than a bank would accept, though typically at a higher rate that reflects the added risk.

A merchant cash advance is the fastest and most credit-lenient option of the three, since approval weighs your daily card sales more than your credit score at all, but it is also the most expensive per dollar borrowed of any option on this list. Treat it as a short-term bridge, not a standing financing strategy, and compare its real cost against a business line of credit or invoice factoring using our small business financing guide before committing.

A worked example: $20,000, three ways

Run the same $20,000 need through three paths to see why lender type matters as much as your score. An SBA Microloan at a representative 10% APR over 4 years, if your local intermediary approves a 590 score with strong revenue, costs roughly $507 a month and about $4,348 in total interest over the term.

A fintech business line of credit at a representative 30% APR drawn as a 12-month installment costs roughly $1,950 a month and about $3,397 in interest, less total interest than the Microloan since the balance is repaid far faster, but requires no fixed collateral and often funds within days rather than weeks. A merchant cash advance on the same $20,000 at a 1.35 factor rate costs $27,000 total regardless of how fast you repay it, meaning $7,000 in fees, before any daily holdback timing risk on slow-revenue weeks. The line of credit and the Microloan land within roughly $1,000 of each other in total interest here, so speed and collateral requirements, not just rate, decide between them; the MCA is the clear outlier, costing $2,600 to $3,600 more in total fees than either one, which is exactly why it belongs in the 'fast bridge' category, not the default choice.

Five moves that improve your approval odds

Choose the right lender type first. A bank or SBA 7(a) lender screens hardest on personal credit; a revenue-based or invoice-factoring lender screens hardest on cash flow, so applying to the wrong lender type for your specific weak point wastes a hard credit inquiry for nothing. If your business owns or is buying equipment, equipment financing is worth a specific look here too: the equipment itself serves as collateral, which routinely qualifies at a lower credit threshold than an unsecured loan of the same size.

Ask for less money: a lender evaluating a smaller, more conservative request is taking on less risk, which can be the difference between an approval and a decline at a borderline credit score. Consider a co-signer with stronger personal credit, understanding that a co-signer is equally liable for the debt if your business can't repay it. And write a short, direct explanation of what caused the bad credit (a specific past event, not a vague excuse) in your application; underwriters read these, and a clear, honest account of a resolved past problem reads very differently than silence on the topic. A free session with a SCORE or Small Business Development Center advisor before you apply can also help you match your specific situation to the right lender type, at no cost.

Build credit for your next round of financing

Every payment you make on whichever financing you choose here is an opportunity to build the credit profile that gets you a cheaper loan next time. On-time payments on a Microloan, a factoring arrangement, or a business line of credit typically get reported to business credit bureaus, and a stronger business credit file can qualify your company for SBA 7(a) or conventional bank financing at a fraction of today's cost within a year or two.

The Federal Reserve's Small Business Credit Survey found that 42% of applicants received the full amount of financing they sought, 36% received some or most of it, and 22% received none at all, so a partial approval or a more expensive first loan is a common starting point, not a sign you did something wrong. Run your specific numbers, loan amount, rate, and term, through our business loan payoff calculator once you have an offer in hand, so you know the real total cost before you sign.

Frequently asked questions