Have any questions? Feel free to contact us:

Finding a Small Business Loan with Bad Credit

Finding a Small Business Loan with Bad Credit
Share on facebook
Share on twitter
Share on linkedin
Share on whatsapp
Obtaining business funding with bad credit can be a challenge. In fact, almost any kind of financial transactions can be made much more difficult when your business suffers from a poor credit score or limited credit history.

Fortunately, small business loans for bad credit customers are becoming more and more popular. 

Alternative lenders are focused on providing bad credit business loans and other bad credit business finance options, so long as borrowers meet revenue and time in business requirements. 

This enables even businesses with credit scores as low as 500 to obtain the small business loans and other small business funding that they need to run their operations, expand, grow, and succeed.

Learn more about bad credit business loans and non-bank, alternative lenders in our guide below.

The Problem with Credit Scores

Too often, credit scores are the be all and end of all of obtaining a loan. This is true in small business funding as well as personal finance. Bankers and traditional financial institutions are very risk-averse, and rely on credit scores as a simple metric to sort and manage risk.

As a result, they set their lending criteria with regards to credit scores very high. This can prevent as many as 80% of applicants from accessing the financing they need.

The Problem with Credit Scores

By focusing on credit scores, they don’t need to do any serious considering of the financial viability and risk associated with a small business loan or credit product and the borrower. 

They can simply rely on the credit score, and if you, as the borrower, don’t measure up to their metric, you’re out of luck. Many people don’t think that model of finance is particularly fair. 

This is made all the more true because so much of our personal and business credit scores and credit files are outside our direct control. 

Small businesses often get stuck with poor credit scores early on in their existence, as it is hard to obtain credit without already having a good credit score. This is a vicious cycle that makes it very hard to improve your credit score or access the funds you need to run your business. 

Thus, bad credit business loans and non-bank, alternative lenders have been created to address these pitfalls of the traditional banking and small business funding system.

Small Business Funding with Bad Credit from Alternative, Non-Bank Lenders

Private lenders have arisen to fill the gaps in the market left by banks and traditional lenders. Offering better service, faster loan approvals, and more easily-met lending criteria, these private lenders can be just what a new small business owner needs. 

These lenders use multiple criteria to determine the risk presented by the borrower, and, as a result, can often offer customers substantial business funding with bad credit.

Small Business Funding with Bad Credit from Alternative, Non-Bank Lenders

On average, credit score requirements from private lenders are hundreds of points lower than those of banks and traditional financial institutions. This means small business loans for bad credit customers are no longer out of reach.

For small business owners, bad credit business loans can be essential to improving their credit score, running their business operations, and growing their business. 

Private lenders understand the paradoxical cycle of credit scores, and that providing credit and loans to small businesses helps them to both build their credit and become successful in delivering the products or services at the core of their business. 

Businesses with less than perfect credit scores in need of bad credit business finance should always consider private, non-bank lenders as their first choice for small business funding. 

It’s easier, faster, and more likely to pan out in your favor as compared to banks and traditional lenders.

Bad Credit Business Loans

Bad credit business loans generally are standard small business loans, but with special qualification criteria to enable those with bad credit to qualify for them. 

The interest charged on these loans may be somewhat higher than that which is charged on loans for customers with better credit scores.

bad credit business loans

But, they provide access to hundreds of thousands of dollars of potential small business loans that can be exactly what many small business owners need.

Typically, bad credit business loans provide up-front lump-sum proceeds for the business, and are then repaid, along with interest, over a specified time period. There are also other bad credit business finance options that are slightly different in their function, repayment schedule, and ideal uses.

Other Bad Credit Business Finance Options

One of the other most compelling forms of bad credit business finance that is available is known as a merchant loan or merchant cash advance. Like bad credit business loans, this financing option provides an up-front lump-sum amount of cash to a small business owner. 

Rather than paying it back over time based on the calendar, however, the loan is repaid with interest based on deductions from credit and debit card sales. Since repayment is tied to sales, the exact loan period is variable. 

Other Bad Credit Business Finance Options

However, for many small businesses – assuming they sell directly to consumers with substantial revenue via credit or debit card sales – a merchant cash advance can be an excellent option for business funding with bad credit. 

It doesn’t strain the financial resources of the business for repayment, since when sales are down, the loan is repaid more slowly. 

Both bad credit business loans and merchant cash advances can be taken out at the same time and used in concert for bad credit business finance.

Business Funding with Bad Credit from BizFly Funding

To obtain business funding with bad credit, take out a bad credit business loan, or otherwise access small business funding when you have bad credit or a limited credit history, you’ll want to choose a private, non-bank lender. 

BizFly Funding is one of the premiere private lenders in the US that focuses exclusively on small business funding. They offer an array of small business loans and credit products, including bad credit business loans. 

You can apply online, get pre-approved quickly, and get funded in as little as 1 business day in many cases. To find out more or start the application process, visit BizFly Funding online at https://bizflyfunding.com.

Frequently Asked Questions about Small Business Loans with Bad Credit

The credit score required for a small business loan will vary significantly based on the lender you choose. Banks and major financial institutions often have much higher credit score requirements than those offered by alternative/private lenders.

In all cases, minimum credit scores should be clearly disclosed by the lender, either on their website or in their loan literature, and readily available to be compared and reviewed prior to applying for the small business loan.

This allows those with bad credit to find a lender to which they can apply and meet the qualification requirements. In most cases, bad credit business loans are available from private lenders for customers with credit scores of as low as 500.

Business funding with bad credit, including bad credit business loans, are typically available as either secured or unsecured. Secured loans require collateral, whereas unsecured loans do not.

In this modern era, it’s easy to find lenders – especially private, non-bank lenders – that offer unsecured small business loans and other small business funding options for businesses with bad credit or limited credit history. 

One example is BizFly Funding, a leading US private lender focused on serving the needs of small businesses – including those with bad credit.

A business credit score and a personal credit score are not the same, nor are their associated files. This is true even if you operate a sole proprietorship or partnership-type business. 

Of course, if you don’t follow good business practices and mingle personal and business funds, the line can become murkier, but this is not recommended. 

Business funds, expenses, and revenue should be properly managed and kept separate from personal finances. 

If those recommendations are followed, then the only way business credit and personal credit can interact is if personal assets are used as collateral for a secured business loan or credit product.

Business credit can be gained by taking out an unsecured loan or other unsecured credit product from a lender. These kinds of loans and credit products don’t require collateral, and are therefore less risky for borrowers. 

Many private lenders offer small business loans and other small business funding products, even with bad credit or a limited credit history. 

There’s no need to take out a massive small business loan – even small loans, taken out and repaid on time – can have a profound impact on your credit score long-term.

Opening a business account with a lender will typically impact your credit score in a cycle. The exact impact and sequence will depend on the type of financing product(s) you choose.

Increasing your debt load may, in the short-term, decrease your credit score. But successfully making required weekly/monthly payments on your small business loans, for example, will improve your credit score. 

Being approved for a business line of credit, and only tapping a small percentage of the credit line, it another way to help grow your credit score. 

Of course, the impact of any kind of business finance decisions can vary based on your individualized business credit file, and you should seek advice from your accountants or advisors prior to making any major decisions.

More to explorer
Don't leave!

Tell us more about your business goals, and one of our funding specialists will reach out to discuss your needs.

Get the financing your business needs in as little as 24 hours!