A closer look at the best startup business loans for bad credit
OnDeck
Best for unsecured startup business loans for bad credit
Who should consider it: OnDeck offers term loans up to $250,000 without requiring physical collateral, making it good for businesses that don’t have large assets to pledge.
OnDeck doesn’t require physical collateral or appraisals, which combined with its minimum credit score requirement makes it a good option for startups that are having trouble qualifying with a traditional lender because of a lack of collateral or a low credit score. Keep in mind though, that payments are daily or weekly.
Headway Capital
Best for low-revenue startups with bad credit
Who should consider it: Headway Capital only requires 6
Headway's repayment terms range between 12 and 24 months, and you can make payments monthly or weekly, offering flexibility that’s important as you start your business. Additionally, there are no prepayment penalties, allowing you to possibly save money on interest.
Fundbox
Best for quick business loans
Who should consider it: Fundbox is a good option for borrowers with bad credit who need capital fast. It can approve applications within minutes and provide funding within the next day.
You may be able to qualify for a business line of credit from Fundbox with a minimum credit score of 600
Fora Financial
Best for short-term loans
Who should consider it: Businesses with bad credit and problems covering cash flow gaps should consider Fora Financial. Those looking to finance long-term purchases should look for lenders that offer longer terms.
Fora Financial is a good option for businesses that are struggling to qualify with traditional lenders and need to access capital fast. You also have the option to borrow more once you’ve paid 60% of your loan; however, this option should be reserved for businesses with good cash flow, that can avoid falling into a bad cycle of debt.
Credibly
Best for easy approval business financing
Who should consider it: Businesses that have been operating for at least six months and have made at least $15,000 in revenue for the past three months.
Credibly offers merchant cash advances with relatively lenient qualification requirements — only a 500 credit score and six months in business — and loan amounts up to $600,000. It also offers prepayment discounts, which allows you flexibility to make the best decision for your business.
Giggle Finance
Best for small-dollar merchant cash advances
Who should consider it: Giggle provides financing up to $5,000 for startups, freelancers and self-employed individuals. Its application process is minimal and funds can be approved and available instantly.
For startups that need a small amount of cash quickly, Giggle’s instant funding may be a helpful option. There is no minimum credit score requirement, and you only need an average of $3,000 in monthly revenue over the past three months, making it a great option for startups that aren’t raking in cash yet. The factor rates, (ranging from 1.15 to 1.52), and high origination fees make this funding expensive; however, given the small loan amounts and flexible repayment schedules, it may work if you can’t qualify for other funding.
» MORE: Best business loans for the self-employed and sole proprietors
Accion Opportunity Fund
Best for women and minority business owners with bad credit
Who should consider it: Accion is a great option for early-stage minority- or women-owned companies that are seeking additional personalized support with their funding. If you need guidance navigating the business funding space, Accion will help even if it is not able to provide funding.
Accion is a nonprofit community development financial institute that is dedicated to addressing financial inequity in underserved communities. Specialists work with your business to provide personalized offers and options that work best for your unique needs. After funding, Accion provides a resource library plus free mentoring and coaching to its borrowers.
National Funding
Best for equipment financing for bad credit
Who should consider it: Businesses with poor credit that need to finance large equipment purchases can benefit from National Funding’s low credit score minimum and lack of down payment requirements.
National Funding finances up to $150,000 in equipment purchases, with no upfront down payment required. It will finance up to 100% of the equipment you’re purchasing, and it offers prepayment discounts, which allow you the flexibility to make early payments in the interest of your business.
AltLINE
Best for invoice factoring
Who should consider it: B2B businesses with bad credit and those that may have cash flow tied up in unpaid customer invoices.
AltLINE is an invoice factoring company that can provide capital in as little as 24 hours. There are no minimum time in business or credit score requirements, making it a solid option for borrowers with bad credit and even the newest business. Furthermore, it will factor invoices as small as $150 and up to $10 million.
SBA Microloan
Best for microloans
Who should consider it: Businesses that need minimal capital to get started, or for ongoing expenses. You may find low loan amounts at some online lenders, but they will likely be more expensive than an SBA microloan.
Many larger lenders don’t find it lucrative to lend in small amounts; however, if your business is forced to take more money than it needs, it can end up doing more harm than good. SBA microloans fill that gap. In fiscal year 2024, the average SBA microloan is $16,524 . They are typically offered through nonprofit, community lenders, and have more flexible requirements than other SBA loans.
What is a bad credit score?
According to the most common scoring models, such as FICO and VantageScore, poor or bad credit scores can fall between 300 and 629, while scores between 630 and 689 may be considered fair. Length of credit history, mix of account types (loans, credit cards, etc.), delinquencies or poor payment history are among the factors that can influence your credit score.
Credit score requirements will vary based on your lender and the type of loan you’re looking for, but bad-credit business loans are generally available to borrowers with FICO scores below 630.
🤓 Nerdy Tip
Predatory lenders often target borrowers who are having trouble qualifying for financing. Be wary of any lender that guarantees approval, advertises business loans with no credit check, requires a fee to review your application and lenders that are not transparent about rates and terms. At best, those may be expensive products. At worst, they could signal predatory lenders that will potentially hurt your new company more than help it.
Where to get a startup business loan with bad credit
Banks and other traditional lenders often won’t lend to startups, especially those with a low credit score or thin credit history, because these businesses don’t have an established financial history to prove they can repay their debts. Online lenders are typically more flexible and generally require six months to one year in business whereas banks often ask for two years or more.
It is possible to get a startup business loan with bad credit, but options will be limited — and potentially costly. Here are some choices to consider.
Online lenders
Online lenders may offer startup business loans to companies less than a year old or those whose owners have lower credit scores. Generally, these loans will have high annual percentage rates (APRs) because startup borrowers with bad credit are seen as riskier for the lender.
To qualify, your startup will typically need to be generating income already. For example, the Fundbox line of credit requires at least $8,333 in monthly revenue. You don’t usually have to provide collateral for these loans, though lenders may ask for a personal guarantee and/or take out a general lien on your business assets.
Online lenders may offer different types of business loans, such as short-term loans, business lines of credit, equipment financing and invoice factoring.
» MORE: Compare the best startup business lines of credit
Community development financial institutions
Community development financial institutions, or CDFIs, receive funding to help underserved communities. Startups that lack resources, opportunity or financial access may be able to get a business loan from a CDFI, even with bad credit.
Because CDFIs are typically banks and credit unions, they may offer competitive rates if you can qualify. However, approvals can take time, so your business will need to be able to wait for funding.
You can find a full list of community development institutions in your state on the CDFI Fund website.
Microlenders
Similar to CDFIs, microlenders often focus on providing capital to traditionally underserved individuals who may be underbanked and have insufficient credit. If you qualify, a microloan can be a good choice for bad-credit startups with small funding gaps. Loans are usually $50,000 or less.
Some microlenders also issue loans through the SBA microloan program, which is specifically designed to help women, low-income, veteran and minority entrepreneurs, as well as startups and microbusinesses. Although rates and terms can vary based on the microlender, the program typically offers competitive interest rates and terms up to seven years.
Merchant cash advance companies
Merchant cash advance companies are alternative lenders that offer an upfront sum of capital that you repay with a percentage of your debit and credit card sales, otherwise known as a merchant cash advance. You may also be able to get an MCA directly from your payment processor, like PayPal or Shopify.
MCAs are generally easier to qualify for than typical business loans. Many merchant cash advance companies have low credit score requirements and prioritize your sales history when underwriting your application. As a result, MCAs may be a convenient option for startup businesses with consistent revenue, but lower credit scores.
It’s important to keep in mind, however, that these products can significantly impact your cash flow and have high costs (APRs can reach up to 350%), so you’ll likely want to consider all other options before turning to an MCA.
How to get startup business loans with bad credit
1. Evaluate your business’s credentials
In order to determine what type of business loan you can qualify for, you should check your personal credit score as well as pull your company’s financial documents, such as bank statements and balance sheets.
Although eligibility requirements vary by lender, you’ll typically want to have:
Personal credit score of 500 or higher.
At least six months in business.
Consistent revenue.
2. Calculate how much debt you can afford
A lower credit score and shorter time in business can result in higher interest rates — making it difficult to repay a new loan. You’ll want to figure out how much debt you can afford before comparing loan options.
You should break down different possibilities — taking into account how much funding you need, potential interest rates and the repayment schedule. Many startup business loans for bad credit have a daily or weekly repayment schedule which can negatively impact your cash flow.
Before moving forward, you’ll want to make sure that taking on a loan will actually benefit your business at this time.
» Use our business loan calculator to help you estimate payments and interest costs.
3. Compare lenders
Generally, online lenders will offer the most options for startup business loans for bad credit. You may also find CDFIs or microlenders that are willing to work with your business. You’ll want to make sure that you understand the lender’s product offering and eligibility requirements before applying.
4. Prepare and strengthen your application
Lenders often consider startups and borrowers with bad credit as risky investments. Once you’re ready to start the application process, therefore, you’ll want to strengthen your business profile to help increase your chances of approval. You can:
Improving your credit — both business and personal — can expand our loan options and help you access better rates and terms. To build your personal credit, you can fix mistakes on your credit report and pay down debt. To build your business credit, you can establish trade lines with your suppliers and upload financial statements to the commercial credit bureaus. Some lenders may also offer business loans or lines of credit — backed with cash deposits — that can be used to establish positive payment histories.
If you secure your loan with collateral, an asset that can be seized if you don’t repay the borrowed funds, you may be more likely to get financing. Offering collateral, especially when it’s not required, may also help you access more competitive interest rates and repayment terms.
Having a cosigner on your business loan — someone who agrees to take over payments on the loan if you default — can make your application more favorable to a lender. Valuable cosigners usually have strong credit and personal finances.
5. Submit your application
Depending on your lender, you’ll submit your business loan application online, over the phone or in person. Lenders will typically consider your personal credit score, financial history and time in business as part of the underwriting process and ask you to provide:
A business plan.
Business and personal bank statements.
Business and personal tax returns.
Business financial statements, such as a profit and loss statement or a balance sheet.
Cash flow projections.
You may also be required to sign a personal guarantee.
Because a good business plan can help you get funding, you may want to take advantage of the free services offered by the SBA and resources like your local Small Business Development Center and SCORE. These organizations can help you prepare your business plan and other documents that are required by the lender.
6. Review agreement and get funds
Some online lenders can issue financing within 24 hours, whereas other lenders may take longer to approve and fund loans. Before making a decision, you’ll want to compare any and all loan offers to make sure you’re getting the best deal for your business.
Once you receive your business loan agreement, you should review the document thoroughly. You’ll want to ensure that you understand the terms and conditions — and address any questions or concerns you have with your lender — before signing.
Alternatives for startups with bad credit
Startups with bad credit may have more difficulty getting traditional business loans. If you’re looking for an alternative small-business financing option, here are some to consider.
If your startup isn’t eligible for other forms of business financing, you could consider a personal loan. These loans are credit-dependent, but options are available for borrowers with bad credit. And lenders only consider your personal financial profile, not your business history, when evaluating your application.
If your credit is at the high end of what’s considered a bad score (below 630), you may be able to qualify for a business credit card. You can apply for a business credit card as a true startup — before you’ve generated any revenue at all — though card issuers may give more weight to your personal finances in those cases.
Borrowing money from family and friends may be a low-cost funding option if you can’t get a business or personal loan. The terms of the loan can be flexible because you’ll have the ability to work them out with your family member or friend. However, a written agreement with loan details can help you avoid misunderstanding down the road. Your lenders will also want to consider any IRS guidelines that may apply.
Startup business grants provide financing that you don’t have to repay, although applications may be competitive and time-consuming. Nevertheless, business grants can be a good option if you’re a startup with consistent early revenue, but are facing credit challenges. To qualify, you’ll want to show the grant issuer that your business idea has staying power.
Another financing option is selling equity — or shares of your business — to investors, friends or family. This is typically a good option for tech businesses and fast-growing startups, but other businesses might use an equity crowdfunding platform to reach their funding goal. Investors will probably want to review your business plan and may be more likely to invest if you can show strong early results.
If you’re still preparing to launch your business idea, you might try raising funds with crowdfunding — where donors receive a product or service related to your business in exchange for their contribution.
Read this next:
What are the requirements to get a small-business loan?
What you need to know about getting a business loan for the first time.
Can you get a startup business loan if your company has no revenue?
Frequently asked questions
Certain lenders may promise “guaranteed” startup or bad credit business loans, but you should tread lightly around these offers. Credible business lenders are unlikely to promote guaranteed approval and instead will evaluate your loan application (likely using both your time in business and credit score) before making a decision.
Yes. Some online and alternative lenders are willing to work with borrowers who have a minimum credit score of 500 and less than one year in business. You’ll want to keep in mind, however, that these loan products typically have high interest rates.
You likely won’t need to put up physical collateral (like real estate) to qualify for a startup business loan from an online lender that works with bad-credit borrowers. But online lenders may file a blanket lien against your business or require a personal guarantee. This means your business or personal assets could still be at risk if the loan is not repaid.
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