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Yes, you can get a business loan with bad credit. Several common bad credit business loans, including invoice factoring, equipment financing, revenue-based financing, and microloans accept personal FICO scores as low as 500.
The trade-off is that the cost of capital is usually higher, the interest rate runs above what a prime-credit borrower would pay, and the loan structures are different from what a traditional bank offers. Knowing which small business loan option fits your situation is the difference between paying for capital you can afford and stretching your business too thin.
Why do small business lenders care about personal credit score?
Lenders pay close attention to your personal and business credit scores because they are protecting their own assets. They want to understand how reliably the loan will be repaid. If your credit history is strong, banks will give your application serious consideration. If your credit reflects past financial stress, many traditional lenders will tighten up. That’s a structural reality of how underwriting works, not a verdict on you or your business.
The life of an entrepreneur is full of risk, and most owners have collected their share of bumps and bruises along the way. A less-than-perfect credit score is common, and one or two rejected applications do not close the door. The path forward is to understand which lenders are built for borrowers in your range, what those loans actually cost, and how to position your application for approval.
Best business loans for bad credit.
Minimum credit score is only one variable. Most bad-credit approvals depend on the interaction of credit, time in business, monthly revenue, industry, and collateral (and each lender weighs these differently.) The benchmarks below show where each lender’s floor sits, but actual approval likelihood depends on your full profile. A marketplace application surfaces which lenders are likely to approve you across all variables in a single submission.
What counts as “bad credit” for a business loan?
Most business lenders evaluate a personal FICO score on a scale of 300 to 850. The widely used FICO ranges are:
- Poor (300 – 579)
- Fair (580 – 669)
- Good (670 – 739)
- Very Good (740 – 799)
- Exceptional (800+)
When the business lending industry says "bad credit," it generally means scores in the Poor and lower Fair ranges, which is roughly under 630. The average U.S. FICO score reached 715 in 2025, so a score under 630 puts you below the median, but it does not lock you out of the market.
Two scores typically show up in a business loan underwriting decision. Your personal credit score reflects your individual credit history. Your business credit score is tracked separately, most commonly through a Dun & Bradstreet PAYDEX score (0 – 100) or a FICO SBSS score (0 – 300).
Why both matter: Traditional banks generally want a personal credit score of 670 or higher, and for long-term or SBA-backed loans they often pull business credit as well. Alternative lenders and online lenders weight personal credit less heavily, leaning instead on cash flow, monthly revenue, time in business, and the value of any collateral. That structural difference is why a business loan for bad credit is realistic even when a bank loan is not.
For a full breakdown of how lenders interpret credit thresholds across product types, see our minimum credit score requirements guide.
6 types of business loans for bad credit.
Different loan types underwrite different things. Some focus almost entirely on revenue, some look at the value of the asset being financed, and some weigh your business credit alongside (or instead of) your personal credit. The right fit depends on what you need the capital for, how quickly you need it, and what your business has to offer as proof of repayment ability.
1. Business line of credit
A business line of credit is a revolving credit facility that works like a high-limit business credit card: you draw what you need, pay interest only on the balance, and refill as you repay. Most online lenders set a minimum credit score around 600, require at least six months in business, and want to see $50,000 or more in annual revenue.
Why it matters with bad credit: A line of credit gives you flexibility for short-term needs (payroll smoothing, inventory orders, surprise repairs) without committing to a fixed loan amount. Several online lenders will approve lines for borrowers in the high 500s and low 600s. If your business needs flexible, ongoing access to working capital rather than a one-time lump sum, a line of credit is often the cleanest fit.
2. Revenue-based financing
Revenue-based financing (sometimes called revenue financing or a merchant cash advance) gives you a lump sum today in exchange for a fixed percentage of your future daily or weekly sales until the agreed amount is repaid. Eligibility is built primarily around revenue and bank deposits, not your credit score, which is why some providers accept FICO scores in the low 500s.
How the cost works: Instead of an APR, you usually pay a factor rate (e.g., 1.25 means you pay back $1.25 for every $1.00 borrowed). Because daily payments scale with sales, the structure flexes during slower periods. If your business has steady revenue but uneven credit, and you need cash within days rather than weeks, revenue-based financing is often considered.
3. Invoice factoring
Invoice factoring sells your unpaid B2B or B2G invoices to a factoring company at a small discount. You get the majority of the invoice value upfront (typically 80 – 95 percent), and the factor collects directly from your customer. Most factoring companies do not weigh your personal credit score heavily because the underwriting decision rests on your customers’ ability to pay.
What you can do with it: If your business sells on net-30 or net-60 terms and your cash flow is bottlenecked by slow-paying customers, factoring converts accounts receivable into immediate working capital. If your credit is poor but your receivables are strong, factoring is often the most accessible option.
4. Equipment financing
Equipment financing pays for a specific piece of equipment (a machine, a vehicle, software, anything you can title or attach a serial number to), and the equipment itself serves as collateral. Because the loan is secured, approval thresholds run lower than for unsecured products. Some equipment lenders, including ClickLease, accept credit scores as low as 520.
Why it works for bad-credit borrowers: The lender’s downside is protected by the asset, so personal credit weighs less in the decision. Interest rates also tend to be lower than for unsecured bad-credit options because the lender can repossess the equipment if the loan defaults. For a deeper dive into this product, see our guide to equipment financing with bad credit.
5. Microloans
Microloans are small loans, typically between $500 and $50,000, designed for entrepreneurs and small business owners who cannot access traditional bank credit. They are often issued through nonprofit lenders, community lenders, or government-backed programs. The SBA Microloan Program approved roughly 5,400 microloans totaling around $90 million in fiscal year 2023, with an average loan size of about $16,500.
Why microloans fit bad credit: Many microlenders look at the strength of your business plan, your character, and your community ties as much as your credit history. Some intermediaries will work with scores as low as 550. The trade-off is that loan amounts are capped (the SBA Microloan limit is $50,000) and interest rates run higher than bank rates, often in the 8 – 13 percent APR range.
6. SBA 7(a) loans
The SBA 7(a) program is the SBA’s flagship loan, used for working capital, refinancing, real estate, and most other business purposes. The SBA itself does not set a personal credit score minimum, but individual lenders do. Some non-bank SBA lenders, including Ready Capital, will accept personal credit scores around 640. For more information on how lenders evaluate SBA loan credit scores, read our guide.
Why it matters: SBA 7(a) loans offer terms of up to 25 years and interest rates capped by the SBA, which makes them one of the most affordable products available to a business with bad-but-not-terrible credit. Approval volumes have been climbing: the SBA guaranteed roughly 85,000 7(a) and 504 loans in fiscal year 2025, up from more than 70,000 in fiscal year 2024. The catch is the timeline: SBA approvals routinely take 30 – 60 days, so this product is built for planned needs, not emergencies.
Where to find business loans for bad credit.
Big banks tend to offer the lowest interest rates, but they also tend to deny the most bad-credit applications. Plenty of other lenders (and lender categories) are built specifically for borrowers in lower credit ranges.
Knowing where to look saves time and protects your credit (each hard inquiry knocks a few points off your score, so applying broadly to the wrong lender type compounds the problem).
Service providers
As embedded financing matures, capital is now available inside the platforms you already use to run your business. From accounting software to e-commerce platforms, many tools you already use to run your business may offer access to capital directly within their interface, often with faster approvals and tailored options based on your business data.
Lending marketplaces
Lending marketplaces connect a single application to a network of lenders, then route you to the lenders most likely to approve you based on your profile. Approval rates on marketplaces tend to run higher than at big banks, where bad-credit applications are routinely declined.
Lendio operates as one of the largest small business lending marketplaces in the U.S. The advantage for bad-credit borrowers: one application surfaces lenders across product types and credit ranges, so you can compare offers side by side rather than chasing lenders one at a time.
Online and alternative lenders
Online lenders (sometimes called alternative lenders or fintech lenders) underwrite using technology that weighs bank statements, daily revenue, and time in business more heavily than personal credit. The trade-off is cost: online lenders often charge higher rates to offset the higher risk.
Microlenders
Microlenders, including SBA Microloan intermediaries like Accion Opportunity Fund and Kiva, are designed specifically to fund small amounts of capital to underserved borrowers. They evaluate creditworthiness more holistically than banks: your business plan, community ties, and growth potential carry real weight.
CDFIs
Community Development Financial Institutions (CDFIs) are non-profit or community-based financial institutions that offer loans to individuals and businesses in underserved communities. These institutions prioritize helping those who have historically been denied access to traditional financing options, which often includes business owners with bad credit.
CDFIs typically perform a more holistic evaluation of an applicant's creditworthiness, considering factors such as their character, community involvement, and potential for success. This approach to lending has made CDFIs a popular choice for business owners with bad credit.
Some examples of CDFIs include Accion and the Opportunity Fund. You can find more information about CDFIs through the CDFI Fund.
How a bad credit score impacts your business loan options.
A lower credit score does not just affect whether you get approved; it shapes the cost and structure of the loan. The clearer your understanding of these trade-offs upfront, the easier it is to compare offers honestly.
Interest rates and APR. Bad credit business loans almost always carry a higher annual percentage rate (APR) than prime-credit loans. Where a strong-credit borrower might see an SBA 7(a) loan in the 10 – 12 percent APR range, a bad-credit borrower using revenue-based financing or a short-term online loan can pay the equivalent interest rate of 30 percent APR or more, especially once factor rates are converted to APR.
Unsecured vs. secured. Many bad-credit products are unsecured. This means no collateral is pledged, but lenders compensate for that with higher rates, shorter terms, and tighter repayment schedules. Secured products, like equipment financing and some lines of credit, often unlock better pricing for bad-credit borrowers because the lender’s risk is offset by the asset.
Repayment terms. Bad-credit term loans typically run 3 – 24 months. Lenders shorten the term to reduce risk exposure and surface borrower behavior faster. Shorter terms mean higher periodic payments, so confirm the structure matches your cash flow before signing.
Personal guarantees and collateral. Personal guarantees are nearly universal in bad-credit lending, meaning you are personally liable for the debt if the business cannot repay. Some lenders also require a blanket lien on business assets (a UCC filing). These are standard, but worth reading carefully before signing.
Fees. Look for origination fees (1 – 5 percent of the loan amount), draw fees on lines of credit, prepayment penalties on term loans, and ACH-return fees on daily-payment products. Total cost of capital is the number that matters, not the headline rate.
How to qualify for a business loan with bad credit.
Finding a willing lender is only half the work. The other half is making your application as strong as it can be given what your business has to offer. A few specific moves measurably increase your odds of approval.
Show strong, consistent cash flow. Lenders evaluate revenue trends as much as raw numbers. A business with consistent monthly deposits over the last six months looks safer than one with bigger but erratic revenue. Before applying, clean up bank account overdrafts and aim for at least three consecutive months without negative balances.
Offer collateral. Pledging equipment, real estate, or other business assets gives the lender a fallback if the loan defaults. Secured loans are easier to qualify for and usually carry lower interest rates than unsecured loans of the same size.
Find a co-signer. A co-signer with strong personal credit can meaningfully raise your approval odds and lower your rate. The co-signer is fully liable for the debt if you cannot repay, so this is a real ask, but for applicants close to a lender’s minimum, it can be the deciding factor.
Build your business credit. Your business credit history is tracked separately from your personal credit. Establish a DUNS number with Dun & Bradstreet, get a business credit card, and pay net-30 vendor accounts on time. Even a few months of clean business credit activity can offset weaker personal credit on a lender’s scoring rubric.
Build a strong business plan. Lenders want to see a clear plan for how the capital will be used and how it will be repaid. Include realistic financial projections, a debt-service coverage calculation, and a one-page summary of how this specific loan moves your business forward.
Apply selectively. Hard credit inquiries lower your score by a few points each and stack up quickly. Use marketplaces, prequalification tools, and lenders that run soft pulls during initial underwriting. Save the hard pull for offers you are seriously considering.
How to improve your personal credit score.
Improving your personal credit score is a long-term project, but every point you add expands the universe of loans you can access, and the rates you can access them at. The steps below are the ones that move the needle fastest.
- Pay off outstanding debts - Focus on paying off any outstanding debts as soon as possible. This will not only improve your credit score, but also save you money in interest.
- Make your payments on time - Late payments can significantly impact your credit score. Make sure you are making all of your payments on time, whether it's for a loan, credit card, or bill.
- Monitor your credit report - Regularly check your credit report for any errors or discrepancies. If you find any, dispute them with the credit bureau to have them corrected.
- Reduce your credit utilization - Your credit utilization ratio is the amount of available credit you're using. Aim to keep this below 30%, as it could positively impact your credit score.
- Don't apply for too many new lines of credit - Each time you apply for a new loan or line of credit, it results in a hard inquiry on your credit report. Too many of these can negatively impact your score.
Red flags: how to avoid predatory bad-credit lenders.
Higher rates are expected with bad-credit financing. Predatory pricing and predatory contract terms are not. A small number of lenders specifically target borrowers with poor credit using structures designed to make the borrower’s position worse over time. The red flags below should slow you down.
Refusal to disclose APR. A legitimate lender quotes an APR or, for products like factoring or revenue-based financing, gives you the total dollar cost of capital. If a lender will only quote a factor rate without a matching APR equivalent, ask why.
Upfront fees before funding. Legitimate lenders sometimes charge origination fees, but never before you have signed a loan agreement. Any lender requesting application fees, processing fees, or insurance payments before funding is a common advance-fee scam.
Guaranteed approval. "Guaranteed approval" is a marketing claim, not an underwriting outcome. Every legitimate lender underwrites, even at the lower end of the credit market.
Triple-digit effective APR. Some short-term products carry effective APRs of 100 percent or more. If the math is being obscured by daily payments, factor rates, or holdback percentages, run the conversion yourself or ask the lender to show it.
Confessions of judgment. A confession of judgment is a legal clause that lets a lender bypass court process if you default. With it, they can move directly to wage garnishment or bank account seizure. These clauses are restricted in many states. Avoid contracts that include them.
Pressure to sign immediately. High-pressure sales tactics, artificial deadlines, and "sign today or lose the offer" are tactics designed to prevent you from comparing offers. A legitimate offer will still be available after you have read the contract.
Next step: compare bad-credit loan offers.
Bad credit narrows the universe of business loans, but it does not close it. Several bad credit business loan types, including invoice factoring, equipment financing, revenue-based financing, microloans, online lines of credit, and some SBA products, accept the credit profile you have today. The work is figuring out which small business loan fits your business and comparing real offers rather than chasing lenders one at a time.
Compare bad-credit business loan offers across multiple lenders with one application through Lendio. The application is free and does not impact your personal credit score.
What this comparison does not decide.
The picks and product breakdowns above are a starting point for narrowing options. They do not determine your approval likelihood, your specific rate, or your full eligibility. Those depend on lender-specific underwriting and the financial details of your business.
