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Top Bad Credit Business Loans of 2021

bad credit business loans of 2021


Updated July 20, 2021
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Editor’s note: At Lantern, we strive to help you make financial decisions with confidence. To do this, we occasionally feature content that includes information about our partners and their products or services. We do not provide, endorse, or guarantee any third-party product, service, information or recommendations—and our opinions are our own.
Managing a small business can always be challenging, but especially during the COVID-19 pandemic. From ensuring the safety of your staff to maintaining business operations, there’s a lot to think about. If you do need support for your small business during COVID-19, assistance is available through the Small Business Administration's (SBA) coronavirus relief options, which include SBA Express Bridge Loans and SBA Debt Relief. If you’re looking for a small business loan with bad credit or no credit, you may face some extra hurdles. Oftentimes, banks will prefer to lend to borrowers with strong credit scores—typically a personal credit score of 680 or higher—leaving business owners wondering  how to apply for a business loan if they have bad credit or their business has no credit history.Fortunately, there are options for bad credit business loans and financing, particularly from alternative lenders. Even if you have a personal credit score below 580 (typically considered a “poor” score) you may find that there are lenders who offer options to help you start, grow, or expand your small business. Below, you’ll find a guide to some of the things that might help you with the process of applying for a business loan when you have bad credit, as well as different loan options to help you reach your financial goals.

Bad Credit Business Loans: Sample Lenders

Below are five lenders who offer bad credit business loans. The sampling is based on the highest non-advertisement listings in a Google search for “bad credit business loans” (conducted during the writing of this article).

Who Offers Bad Credit Business Loans?

Information accurate as of January 4, 2021

What’s Considered Bad Credit?

Your personal credit score, a rating derived from your credit history, is an important indicator of your creditworthiness to lenders. Similarly, when your business builds up a credit history, it, too, may receive a credit score that potential lenders can use to assess whether to lend it money. If your credit rating isn’t high enough or your business hasn’t been in existence long enough to build up a credit history, potential lenders may evaluate you as having bad credit or no credit, and it may be harder for you to get good terms on financing or even any financing at all. Understanding what lenders may be looking for may help you figure out your best options for getting the funding you want.

Personal Credit vs. Business Credit

A common question when you’re trying to figure out how to apply for a business loan with bad credit is whether a lender will look at your personal credit score or your business’s credit score.Personal credit is based on your individual credit history, including factors such as your record of borrowing and repayment on items like credit cards and loans. It’s connected to your social security number (SSN) and includes specific details regarding any credit-related inquiry. Your credit score is used to sum up how creditworthy you are considered so that potential lenders can assess how risky loaning money to you might be. Most personal credit scores can range from 300 to 850 ( although there are a few different scoring models with slightly different scales). Less than 580 is typically considered a poor score.Business credit is based on the financial history of a business. Instead of being connected to an individual's SSN (even the SSN of the owner), it’s generally connected to the business’s employer identification number (EIN). Business credit scores may be issued by several different companies with different systems. Some (though not all) range from 1 to 100, and higher scores are typically viewed more favorably by lenders than lower ones. The scores are generally determined by factors that can include payment history, business history, credit utilization ratio (how much the business currently owes divided by its credit limit), and type of industry.Every lender may have its own rules, but in general, on a scale of 1 to 100, a business credit score of 80 or above means that the business is likely to be seen as low risk, while a score of 49 or below may suggest high risk to potential lenders. While your personal credit score and your business’s credit rating are different, they can both matter when you’re looking for a business loan, particularly if you’re a sole proprietor--the only owner of your business. When banks are evaluating an application for a business loan, they commonly review both personal and business credit scores, if available.Can you get a business loan with bad personal credit or poor business credit? There are a number of bad credit business loan options available, but you may find that their interest rates are higher and their terms different from good credit options. That’s because loaning to a business with bad credit presents a higher risk to the lender. But there are still ways to apply for a business loan with bad credit and options beyond loans that you can consider.

Why Your Personal Credit Score May Matter for a Business Loan

Many businesses start out with a sole proprietor--just one person who owns the business. Especially when the business is new and hasn’t had the chance to build up a credit history yet, potential lenders may look at the owner’s personal credit when they’re assessing the business’s creditworthiness. A majority of lenders will consider your FICO® score (the credit score issued by the Fair Isaac Corporation) when evaluating an application for a small business loan. Pullquote describing how banks and SBA lenders typically require a personal credit score of 680 or above, while alternative lenders tend to be more flexibleWhile FICO has different versions of its credit scores for different purposes, personal FICO credit scores are generally determined using the following factors: 
  • New credit – 10%
  • Credit mix – 10%
  • Length of credit history – 15%
  • Accounts owed – 30%
  • Payment history – 35%
Every personal credit score uses these five categories, but the importance of each can vary depending on the individual. For example, a person with a long credit history will be evaluated differently than someone who is just beginning to establish credit.Lenders use multiple factors to determine what small business financing options they want to offer you. But even though your credit score is just one factor, lenders may have minimum personal credit score requirements to qualify for loan products. That’s why it can be useful to know what your personal credit score is and whether it’s considered good or bad when you’re applying for a business loan. You can start by comparing you score against this table, which is based on information from FICO (the Fair Isaac Corporation):
Based on where your personal credit score falls on this chart, you can estimate whether you might be in a good position to apply for standard financing. If not, it may be worth considering a bad credit business loan. (But don’t forget that you may also have a business credit score, with a different range and factors, which potential  lenders may also take into consideration.)Banks and SBA-approved lenders generally require credit scores over 680 to qualify for a small business loan, in addition to credit history. Alternative lenders, like those who offer online loans or options like merchant cash advances or factoring services, may accept lower credit scores, those below 600, but you may face higher total borrowing costs due to increased interest and factor rates.Keep in mind that each lender will likely have its own qualifications and eligibility requirements and may evaluate other aspects of your business, like revenue history and time in business. 

Applying for a Business Loan with Bad Credit

Getting a business loan with a lower credit score may require a bit more legwork. There are five steps in applying for a business loan with less than stellar credit.

Checking Your Credit Scores

To find your personal credit score and history, you can request a credit report from any of the major bureaus: Equifax, Transunion, or Experian. The Fair Credit Reporting Act (FCRA) entitles individuals to one free copy of their credit report per year from each of the three bureaus.There are also some alternative services, such as myFICO®. This company lets you order your credit scoret. Some of these services charge a fee while others may offer it at no cost. Keep in mind that some banks and credit card companies may give customers their FICO scores for free.When you’re looking into a bad credit business loan and you want to know your business credit rating, however, digging that up may be more challenging than finding your personal credit rating. The following sources may offer comprehensive business credit ratings, but keep in mind that some are paid services:
  • Dun and Bradstreet – One of the major reporting agencies for business credit. To get a score, you'll need to apply for a D-U-N-S number, which business lenders can use to find your business’’s credit history and other information  when they’re searching for and evaluating potential borrowers. 
  • Experian 
  • Equifax
After you’ve gathered your credit reports and scores, you’ll probably be better prepared to determine how eligible you are for financing by comparing your ratings against potential lenders’ minimum requirements.

Determining Your Eligibility

The following table offers a simple overview of the average minimum personal credit scores needed to secure different types of business loans. Note that each lender’s individual eligibility requirements may vary from the ones given here and that credit score is just one factor that goes into a lending decision. While this table can provide an approximate sense of what the required number might be, it’s also helpful to look at the specific requirements of each lender you’re considering.*Some online lenders may not have minimum credit score requirements.

Improving Your Chances of Getting a Business Loan

six tips to improve chances of approval on a business loanWorking toward a higher credit score can take time, but a strong credit score may better your chances of securing a more competitive interest rate on a small business loan. Doing that may mean that you’re less likely to need to fall back on a bad credit business loan. And keep in mind also that your credit score is just one factor that lenders typically evaluate when making lending decisions.

1. Checking your credit reports and disputing any errors

It’s important to monitor your personal and business credit scores to ensure there aren’t any incorrect entries. An error on your credit report could lower your score, making it more difficult for you to secure the financing your business needs. Check your personal credit reports with the three major credit bureaus (TransUnion, Experian, and Equifax) and report any potential errors directly to that bureau. You can access a copy of each of these credit reports for free once annually. You may also want to check your business credit history with Dun and Bradstreet, Experian, and/or Equifax. The sooner you can catch and correct any discrepancies, the sooner you can improve your chances of getting approved for funding.

2. Establishing credit with a business credit card or line of credit

Even if you’re not able to borrow a new business loan with bad credit, it may be possible to  work on building your business credit, especially if your business is new. Taking steps  like opening a dedicated bank account, filing for an EIN number, and establishing a business address and phone number can help you establish your business credit. One way you can work towards improving your business credit score is by using a business credit card to make small daily purchases. To build credit, it’s important to pay your business credit card bill on time each month and avoid carrying a balance.If you qualify for it, another option that may help you build business credit is taking out a business line of credit. Like a credit card, a credit line lets you take out available credit to make purchases and then pay in full each month. Some lines of credit are revolving, while some close after they’re paid in full, but both give you access to cash flow to support your business while you’re also laying a positive credit foundation. And finally, consider keeping your business credit card or line of credit accounts open, even if you aren’t using them. Canceling a business credit card could impact your business credit score.

3. Keeping your business expenses separate from personal expenses

There are a number of reasons to keep your business and personal expenses separate. These include building credit, keeping your records accurate, and streamlining your taxes, as well as for the legal implications. Whether you’re just starting your business or trying to build good credit, these steps can help you establish and maintain a separation between your business and personal expenses:
  • Open and maintain separate business and personal bank accounts
  • Avoid using your business credit card for personal expenses and vice versa
  • Register your business with an EIN number
  • Hire a bookkeeper to manage accurate accounting for your business

4. Maintaining your personal credit score

Can you get a loan with a 500 personal credit score? It may be difficult, which is why it’s important to maintain strong personal credit if it’s at all possible. Even though your business and personal credit are separate ratings, having a good personal credit score may improve your chances of getting approved for a business loan. When lenders see strong personal credit, it highlights for them that you’re a trustworthy borrower. One way to build and maintain a good personal credit score is to pay your credit cards and other outstanding debts on time.

5. Taking the time to build credit

Trying to figure out how to apply for a small business loan with bad credit and no collateral can be frustrating. Building credit may take awhile, but it’s usually worth the effort. That’s because a strong credit history can help you get favorable rates and terms on future loan products.For starters, you can aim to work with vendors and suppliers who will report your business dealings to the major credit bureaus. Paying your outstanding balances and invoices on time can also potentially help you establish and build better business credit. But keep in mind that not all companies will report on your behalf, and try to choose judiciously.If you’re able to wait to apply for a loan, delaying your application could be an opportunity to continue paying down other debts and credit cards, or making any other regular payments that show a stable financial history. By taking the time to build a good track record, you can prove your dependability as a borrower and potentially improve your chances of being approved for more favorable loan products in the future. 

6. Diversifying your credit

Creating a good credit mix is an important step in building good business credit. A mix of credit means that you have varied lines of credit, credit cards, loans, and other products. Once you’ve established good business credit, having a well-rounded credit mix can help you maintain or potentially improve your credit score, so long as you’re responsibly making payments on each account. Another factor to keep in mind is your credit utilization ratio. This is how much available credit you’re using. Maxing out every line of credit may present a negative picture of your business, while using around 25% of your credit typically suggests that you’re a responsible borrower.

Preparing Documentation

When you’re planning to apply for bad credit business loans, it may help to gather the following documents:
  • Personal and business credit reports 
  • Business bank and financial statements
  • Legal documents related to your business
  • Business and personal tax returns
  • Personal identifying documents
  • Business plan
Some lenders may not require all of these documents, but having them all ready in case they’re needed can be helpful. In fact, some lenders may even require additional documentation. And while you’re gathering this paperwork, it can also be a good opportunity to assess your business’s financial status, too.

Comparing and Applying for Bad Credit Business Loans

Now that you’ve taken steps to prepare,  you’re also equipped with knowledge that can help you make a decision on which loan products and lenders suit your business needs. Consider the following factors when comparing your business loan options:
  • When you need funding by
  • The documents needed to apply
  • Interest rates and terms
  • The length of application and approval time
  • Required personal and/or business credit ratings
  • Whether you have collateral to offer
When you’re applying for a business loan with bad credit, banks and other traditional lenders may be more likely to lend to you if you’re able to back the loan with collateral. If you don't have any collateral to offer, it may be worth reviewing alternative lenders, who may be more likely to have funding options for companies with less than stellar credit. After you’ve chosen a lender, complete the application process. Remember that applying for multiple loan products shows up as hard pulls on your credit report, which might negatively affect your credit score. While this may matter less for an applicant with good credit, if you’re trying to build your business and personal credit, it can be important to limit how many products you apply for. Note that some lenders allow potential borrowers to see if they qualify for a loan and at what rates, by pre-qualifying. To do this, lenders generally do a soft-credit pull, which doesn’t impact your credit score like a hard-credit pull.

Types of Bad Credit Business Loans

Now that you’ve prepared your documents for the bad credit business loans you may be eligible for, it’s time to look at specific types of financing in more detail. Below are eight different financing options that may be available to you, even if you have low credit or no credit. 

Secured Business or Personal Credit Cards

When you get a secured credit card, you have to provide a security deposit to open the card. That deposit acts as collateral in the event you default on your payments. This lessens the risk for the credit card company, and therefore improves your chances of getting approved. If you are looking for a startup business loan with bad credit and no collateral, opening a secured personal or business credit card may be an option to consider. If you make payments on time for a certain period, your creditor may even offer you an unsecured card to help build up your credit rating further. 

Personal Loan

A personal loan is typically a term loan in which you receive a fixed amount of money from a bank or alternative lender. Over time, you pay back the amount borrowed plus interest in regular installments. The term, loan amount, and interest rate are based on the borrower’s qualifications and other conditions set by the lender. While it may be tempting to use a personal loan in place of a bad credit business loan, mixing your business and personal credit isn’t necessarily ideal, especially when you’re trying to build business credit. Additionally, if you want to use a personal loan for business, you’ll need to check with your lender to make sure there aren’t limitations on how the funds can be spent. 

Peer-to-Peer (P2P) Lending

Peer-to-peer lending lets borrowers and investors connect directly, eliminating the need for a financial institution to facilitate the loan process. Borrowers who are trying to get unsecured business loans with bad credit or whose business is new may find more financial options to choose from in this category than from other kinds of lenders.Borrowers and lenders use P2P networks to find each other based on business needs, purpose, and qualifications. Fund transfer and payments go directly through the P2P platform for a simple, manageable process. Because you work with an investor directly, there may be more emphasis placed on your businesses purpose and long-term goals.

Equipment Financing

Equipment financing can help you purchase necessary equipment, machinery, and other items for your business. Equipment financing may be a viable loan option for a business with a low credit score or limited collateral because the equipment itself acts as collateral. In other words, if you default on your payments, the lender can claim the equipment to recoup its losses. Equipment financing can help you purchase big-ticket items without the financial strain of paying a lot of money all at once. The terms on loans like these may range anywhere from a few months to 10 years, and generally vary based on the lifespan of the equipment. 

Invoice Factoring

A short-term financing option known as invoice factoring lets you sell your invoices to a factoring company, which assumes responsibility for collecting payments from your customers. Typically, B2B companies or operations with irregular billing cycles rely on this type of financing.Businesses may use invoice factoring as a quick way to supplement cash flow or when they need a bad credit business loan. Since the factoring company is responsible for collecting payment from your customers, it’s important to partner with a company that’s reputable and uses fair collection practices. 

Inventory Financing

Inventory financing helps a business maintain cash flow while it’s purchasing additional inventory, typically in preparation for a seasonal spike. That new inventory serves as collateral and lenders offer financing based on a percentage of its value. This can be a good option if you don’t have collateral and need funds to stock up on inventory.


Microloans are loans offered by nonprofit and peer-to-peer organizations for smaller loan amounts, typically less than $50,000. If you require just a small amount of financing and don’t qualify for a larger loan, a microloan may help you get the funding you need to cover basic startup costs and other business expenses. Since newer, smaller, businesses often seek microloans and haven’t yet established business credit, it’s helpful to have an established personal credit history to help the lender make its financing decisions. SBA microloans are also available and may have advantages like longer terms and better interest rates, but they require a strong credit rating.  

Merchant Cash Advance

A merchant cash advance is not actually a loan, but a way for a small business (“merchant”) to get a cash advance for business expenses in return for a portion of its future credit/debit card sales. Merchant cash advance companies purchase a business’s future sales at a discount and in return, offer quick financing. A business owner trying to get unsecured business loans with bad credit may find that merchant cash advances are an option for quick cash, but they do often come with high interest rates and fees. Additionally, since merchant cash advances are not technically loans, companies don’t receive the same governmental oversight and regulation as traditional lenders. If you decide to go with this option, research the different merchant cash advance companies carefully to ensure that the one you choose operates in a fair and trustworthy manner.

Compare Options for Bad Credit Business Financing

Running a small business and securing the capital needed to keep it running isn’t easy. Whether you need a long-term business loan, a bad credit business loan, or a short-term financing option to jumpstart your business, Lantern Credit is ready to help. We help potential borrowers find and compare online business loans based on their needs and qualifications. After all, if you can spend less time shopping around for lenders, you can devote more time to growing your business.
Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website on credit ( tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.SOLC20061

Frequently Asked Questions

Can I get a business loan with a 500 credit score?
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About the Author



Lantern is a product comparison site that makes it easy for individuals to shop for products and compare offers with top lenders. Lantern is owned and operated by SoFi Lending Corp., the digital personal finance company that has helped over one million people get their money right.
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