Business Loans

How to Get a Startup Business Loan For Bad Credit in 2023

Oct 16, 2023 • 10+ min read
startup loans when you have bad credit
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      Starting a small business is expensive. Almost every small business owner faces startup expenses, whether you’re a solopreneur needing a laptop or a construction company purchasing a lot full of heavy machinery. Inventory and equipment must be bought, employees or contractors must be paid, and rent comes due every month.

      What’s harder, outside funding is often difficult to access when your company is young, but in need of capital. Startup business loans are a great way to bridge this funding gap—and even if you have a suboptimal credit score, there are forms of financing you can probably still access.

      Best Startup Business Loans For Bad Credit in 2023*

      The following list highlights lenders from our selection of best business loans that offer minimum credit requirements of 650 or below and a minimum time in business requirement of six months or less.*

      Lender/Funder*Loan/FInancing AmountMin. Time in BusinessMin. Credit ScoreTime to Funds(After Approval)
      ClickLeaseUp to $20,000Any520As soon as same day
      Gillman-Bagley$50K-$10 million3 monthsN/AAs soon as next day
      Eagle Business FundingUp to $5 millionNoneN/A48 hours
      CrediblyBusiness Cash Advance6 months55048 hours
      Expansion Capital GroupBusiness Cash Advance6 months550Within 24 hours
      Good FundingBusiness Cash Advance3 months575Same day
      FundboxLine of Credit6 months650Same day

      Business Loan Options For Startups With Bad Credit

      If you’re starting a business with a lower credit score, there are several loan routes you can take. 

      SBA Loans

      While the SBA 7(a) and SBA 504 loan programs were created for established businesses, the SBA does offer two startup loans.

      1. Microloans

      The Small Business Administration’s (SBA) Microloan program is designed specifically to assist small businesses, start-ups, and nonprofit child care centers. This program offers loans up to $50,000, with the average loan being around $13,000. The funds can be used for various purposes including working capital, inventory, supplies, and machinery or equipment. However, microloans cannot be used to pay off existing debts or purchase real estate.

      To qualify for an SBA Microloan, the borrower must meet certain criteria:

      • Credit history – The borrower’s credit history is reviewed. While there isn’t a minimum credit score requirement, a good credit history can improve the chances of approval.
      • Collateral – Depending on the loan amount, the borrower may have to provide collateral to secure the loan.

      Remember, the SBA doesn’t provide the loan itself, but instead, it works with approved intermediary lenders to offer these loans.

      2. Community Advantage Loans

      The Community Advantage (CA) program is another offering by the SBA, aimed at promoting economic growth in underserved markets. Community Advantage loans can provide up to $350,000 in funding. These funds can be used for a range of business activities, including startup costs, expansion of an existing business, and working capital.

      To qualify for a Community Advantage loan, certain criteria must be met:

      • Credit history – Similar to the SBA Microloan, the borrower’s credit history is assessed. While no specific minimum credit score is set, borrowers with a good credit history typically have a higher chance of approval.
      • Collateral – Depending on the loan amount, collateral might be required to secure the loan. The specifics regarding collateral are determined on a case-by-case basis.
      • Location – The business must be located in an approved underserved market, which typically includes low-to-moderate income areas, Empowerment Zones, and Enterprise Communities.

      Remember, as with the SBA Microloan program, the SBA does not provide the loan directly. Instead, it works with approved lenders to provide Community Advantage loans.

      Online Lenders

      In the realm of bad credit business loans, online lenders often emerge as a viable option for startups. These lenders provide a variety of financing options, many of which are designed with lenient credit requirements, specifically catering to business owners with bad credit. While online lenders also offer SBA loans and term loans with more stringent credit requirements, they also offer alternative forms of financing.

      Business Lines of Credit

      Many online lenders provide business lines of credit that allow businesses to draw funds up to a maximum limit as needed. Similar to a credit card, you only pay interest on the amount you use, making it a flexible financing option.

      Invoice Financing

      Online lenders often offer invoice financing, allowing businesses to borrow against their outstanding invoices. This can provide immediate cash flow while waiting for customers to pay.

      Business Cash Advances

      A business cash advance, typically offered by online lenders, is an upfront sum of cash in exchange for a slice of future sales. This can be a beneficial option for businesses with strong sales but poor credit.


      Community Development Financial Institutions, or CDFIs, are private financial entities that are primarily dedicated to delivering responsible, affordable lending to aid low-income, low-wealth, and other disadvantaged communities. CDFIs play a significant role in generating economic growth and opportunity in some of the nation’s most distressed communities. They can offer an array of financial products and services, including business loans, to help underserved communities join the economic mainstream.

      CDFIs are found across the United States, and you can locate one near you by visiting the CDFI Fund’s Award Database. This database provides information about CDFIs that have received financial awards or recognition from the U.S. Department of the Treasury.

      In terms of requirements to work with CDFIs to get a business loan, it varies across different institutions. However, typical requirements may include a business plan, financial projections, personal and business credit history, and collateral. Some CDFIs may also require that the business operates in a specific geographic area or serves a particular community. It’s recommended to directly contact a CDFI for their specific lending criteria and application process.

      How to Get a Startup Business Loan With Bad Credit

      Navigating the world of business financing with bad credit can seem daunting, but it’s far from impossible. Let’s dive into the steps to get your startup funded, even if your credit score isn’t quite up to par.

      1. Evaluate your needs – The first step to obtaining a startup business loan is to evaluate your business needs. Understand how much money you need and what you will use it for. This clarity will help you determine the type of loan appropriate for your business.
      2. Research your options – Research various loan options available for startups. Each type of loan has its own eligibility criteria and terms, including minimum credit score requirements. Compare those requirements to your current credit score to see if you may qualify.
      3. Prepare your business plan – Lenders generally require a comprehensive business plan. This should include an overview of your business, details about your products or services, market analysis, organizational structure, and financial projections.
      4. Gather required documentation – Gather all required documents such as financial statements, tax returns, and legal documents. The specific documents required will vary by lender, so make sure to check with them directly.
      5. Apply for the loan – Once you have all the necessary documents and a complete business plan, apply for the loan. This process varies depending on the lender. It could be online or in-person.

      Alternate Forms of Financing

      In addition to loans, there are alternate forms of financing that can be explored if you have a lower credit score.


      Crowdfunding platforms like Kickstarter or Indiegogo allow you to raise capital through small contributions from a large number of people. This form of financing is often used by startups looking to launch new products or services, and it also offers an opportunity to validate your business idea in the market.

      Venture Capital

      Venture capitalists invest in startups with high growth potential in exchange for equity in the company. These investments are high-risk, but can provide substantial funds for your business, with the added bonus of gaining experienced partners who can offer strategic advice.


      Business grants are sums of money awarded by government departments, foundations, trusts, and corporations to help businesses get started or grow. The great advantage of a grant is that it doesn’t need to be repaid. On the downside, competition can be intense, and the application process can be time-consuming.


      A bad credit score, typically, is a score that falls below 580 on the FICO scale, which ranges from 300 to 850. This rating reflects a history of missed or late payments, defaults on loans, or other negative financial behaviors. Lenders view a low credit score as an indication of higher risk, often leading to higher interest rates or even denial of credit. It’s worth noting that different lenders may have varying definitions of what they consider bad credit, so it’s always best to check with your specific lender.

      Credit scores are to lenders as mountains are to expert skiers—the higher, the better. No matter what your score is now, you can probably better position yourself for application approval if you can move your score upwards. Still, many lenders have minimum credit score thresholds, and you have a strong chance of qualifying, as long as your score is at or above the minimum of 650.

      Unfortunately, if your credit score is below 600, your business funding options are more limited. Certain types of financing, such as invoice financing, do not require a minimum credit score to qualify. Some lenders will also offer equipment financing or a business cash advance if your credit score is in the 500’s.

      Quickly compare loan offers from multiple lenders.

      Applying is free and won’t impact your credit.

      *Disclaimer:. The information provided is accurate at the time of the initial publishing of the page (October 16, 2023). While Lendio strives to maintain this information to ensure that it is up to date, this information may be different than what you see in other contexts, including when visiting the financial information, a different service provider, or a specific product’s site. All information provided in this page is presented to you without warranty. When evaluating offers, please review the financial institution’s terms and conditions, relevant policies, contractual agreements and other applicable information. Please note that the ranges provided here are not pre-qualified offers and may be greater or less than the ranges provided based on information contained in your business financing application. Lendio may receive compensation from the financial institutions evaluated on this page in the event that you receive business financing through that financial institution.

      About the author
      Barry Eitel

      Barry Eitel has written about business and technology for eight years, including working as a staff writer for Intuit's Small Business Center and as the Business Editor for the Piedmont Post, a weekly newspaper covering the city of Piedmont, California.

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