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Best bad credit business loans in February 2023

Feb 02, 2023
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Compare the best bad credit business loans in February 2023

LENDER AND LOAN TYPE BEST FOR MIN. CREDIT SCORE LOAN AMOUNT MIN. TIME IN BUSINESS
Credibly small business line of credit Line of credit 600 Up to $300,000 6 months
Fora Financial small business loan Working capital 500 $5,000-$1.4 million 3 months
Lendio line of credit Comparing lenders 560 $1,000-$500,000 6 months
PayPal Working Capital loan No credit requirements Not applicable $1,000-$500,000 90 days
Upstart small business loan Fast funding 560 $5,000-$200,000 12 months

Credibly small business line of credit: Best for line of credit

MINIMUM FICO CREDIT SCORE
600
MINIMUM ANNUAL REVENUE
$180,000
MINIMUM TIME IN BUSINESS
6 months
INTEREST FROM
Varies
LOAN AMOUNT
Up to $300,000
TERM LENGTHS
Not disclosed

 

Overview: Credibly helps small and medium businesses quickly get the cash they need, minus the hassle. Its small business line of credit is designed for business owners who want a flexible solution that lets them access working capital on an as-needed basis. Both secured and unsecured options are available, and you’ll only pay interest on the amount you use. Credibly also offers working capital loans, long-term loans, merchant cash advances and a host of other small business financing options. 

Why Credibly is the best for a line of credit: Credibly makes it easy for small business owners to access a line of credit. It features flexible qualifying criteria and fast funding times to help you access the cash you need sooner than later. Plus, you’ll build business credit and only pay interest on the funds you use. 

Pros

  • Generous loan limit of $300,000
  • Only six months in business needed to qualify
  • Access funds as soon as 24 hours following approval

Cons

  • Some borrowers pay an origination fee
  • Requires at least $180,000 in annual revenue to qualify 
  • Credibly does not disclose its interest rate range

Fora Financial small business loan: Best for working capital 

 
MINIMUM FICO CREDIT SCORE
500
MINIMUM ANNUAL REVENUE
$144,000
MINIMUM TIME IN BUSINESS
3 months
FACTOR RATE FROM
1.15-1.40
LOAN AMOUNT
$5,000-$1.4 million
TERM LENGTHS
4-15 months
 
Overview: Established in 2008, Fora Financial is a direct lender. Its working capital loan is designed to help small business owners access the funds needed to capitalize on lucrative opportunities. Plus, you may request a higher loan after you’ve paid off at least 60 percent of the balance, which is not a perk you’ll find with most traditional lenders. 
 
Why Fora Financial is the best for working capital: Fora doesn’t make prospective borrowers jump through many hoops to determine their eligibility for working capital. Seeking pre-approval on the website is easy, and Fora may be willing to work with you despite your past credit challenges. Plus, you could be eligible for a discount if you repay the loan before the term ends. 
 
Pros
  • Accessible to borrowers with credit scores as low as 500
  • Get pre-approved with a soft personal credit inquiry
  • Prepayment discounts available 
Cons
  • Processing fee of 2.5 percent or more assessed at closing 
  • Factor rate means interest applies at origination, so there's no benefit to early repayment
  • Short repayment periods can make the loan payment unaffordable 
 

Lendio line of credit: Best for comparing lenders

MINIMUM FICO CREDIT SCORE
560
MINIMUM ANNUAL REVENUE
$50,000
MINIMUM TIME IN BUSINESS
6 months
INTEREST RATE FROM
8.00%-24.00%
LOAN AMOUNT
$1,000-$500,000
TERM LENGTHS
1-2 years
 
Overview: Lendio is an online lending marketplace that matches small business owners with competitive funding solutions. Small business owners can choose from an assortment of financing options. With the line of credit, you can access capital at a competitive rate while jumping through fewer hoops than with a traditional lender. Instead, Lendio matches you to lenders willing to do business with you based on your financial profile and the information you submit.
 
Why Lendio is the best for comparing lenders: You don’t need perfect credit or extensive business experience to access a line of credit through Lendio. Plus, the online lending platform makes it easy to explore several options you may be eligible for in minutes without hurting your credit rating. And you won’t find spending restrictions with most lenders, so you’re free to use the funds however you see fit to grow your business. 
 
Pros
  • Competitive interest rates 
  • Only draw what you need to keep borrowing costs low
  • Lower maximum interest rate, considering this product is available to subprime borrowers 
Cons
  • Short loan term of one or two years could make the monthly payment unaffordable 
  • Some lenders may charge fees
  • Slow funding time of up to two weeks 

PayPal Working Capital loan: Best for no credit requirements 

MINIMUM FICO CREDIT SCORE
None: No credit check
MINIMUM ANNUAL REVENUE
Premier account: $20,000 in PayPal sales Business account: $15,000 in PayPal sales
MINIMUM TIME IN BUSINESS
90 days with a PayPal Business or Premier account
INTEREST RATE FROM
N/A; single fee instead
LOAN AMOUNT
$1,000-$150,000, or $250,000 for repeat borrowers
TERM LENGTHS
Depends on repayment plan
 
Overview: PayPal’s working capital loan is an innovative business funding solution — if you’re already a PayPal customer. Traditional business loan products determine your eligibility and funding amount by your creditworthiness, income and current debt load. PayPal takes an alternative approach. You’ll be approved for a loan based on your sales volume. You can select the terms that work for you by setting a percentage to be automatically deducted from your future sales. Instead of interest, PayPal charges a single fixed fee.
 
Why PayPal is the best for no credit requirements:  If you’re worried you won’t qualify for a business loan due to your credit rating, consider this loan product. PayPal makes it easy to get approved if you generate consistent sales through its platform. You’ll need just 90 days in business with an active PayPal account. Even better, there is no personal guarantee requirement. Plus, PayPal doesn’t perform credit checks — the amount you’re approved for is based on your sales volume. 
 
Pros
  • No minimum credit score requirement 
  • Easily accessible for new business owners 
  • Low minimum annual revenue requirements 
 
Cons
  • Only available to PayPal users
  • Loan fee not disclosed, which makes comparison difficult
  • Loans not offered in North Dakota, South Dakota and Virginia 
 

Upstart small business loan: Best for fast funding

MINIMUM FICO CREDIT SCORE
550
MINIMUM ANNUAL REVENUE
Not disclosed
MINIMUM TIME IN BUSINESS
12 months
APR
Up to 35.99%
LOAN AMOUNT
$5,000-$200,000
TERM LENGTHS
1 or 2 years
 
Overview: Upstart, an artificial intelligence-driven lending marketplace, offers various lending solutions for small business owners. This online lender looks beyond credit scores to provide small business owners with tailored small business loans. You’ll have access to between $5,000 and $200,000 in funding with a repayment period of one or two years. 
 
Why Upstart is the best for fast funding: You can check your rate online from lenders in the Upstart network in five minutes. If approved, receive your loan proceeds as soon as the next business day. Plus, the online application process is seamless, and the team at Upstart does most of the legwork to verify the information you submit. This means you won’t have to gather a pile of documents. 
 
Pros
  • Online preapproval available with no hard credit check 
  • Get funded in as soon as one business day
  • No prepayment penalties if you decide to pay the loan off early 
 
Cons
  • Limited availability by location and industry 
  • Origination fee between 4 and 6 percent 
  • Steep maximum APR of 35.99 percent
 

The Bankrate guide to choosing the best business loan for bad credit

We gathered the top options available to small business owners nationwide with bad credit — or a FICO score below 630 — based on affordability, loan terms, eligibility criteria, funding time and more. For each lender mentioned, you’ll find a detailed description of its business loan product along with benefits and drawbacks to decide if it’s a good fit.
 
Not all these lenders consider themselves “bad credit lenders,” although each lists a relatively low credit score threshold. Likewise, they may not work with borrowers with serious credit issues, including bankruptcies and defaults — they may refer these borrowers to partner lenders. 
 

What is a bad credit score?

It depends on the credit scoring model the lender uses. Most small business lenders look at your personal score, rather than your business credit score. 
FICO is the most prevalent personal credit model, as it’s used by 90 percent of lenders and creditors to make decisions. Scores range from 300 and 850, and consumers with a credit score below about 579 fall into the “bad credit score” category. Here’s a closer look at the rating by FICO score, though note that different lenders define each category differently:
 
  • Exceptional: 800-850
  • Very good: 740-799
  • Good: 679-739
  • Fair: 580-669
  • Poor: 300-579
Lenders may also consider business credit scores, especially if you’re pursuing a Small Business Administration loan or a large amount.
 
Business scores using the FICO Small Business Scoring Service (FICO SBSS) range from 0 to 300. Other major business credit bureaus include Equifax Business, Experian Business and Dun & Bradstreet. Each has its own scoring model and ranges. As your funding needs increase and your personal and business finances become distinct, make sure you’re building good business credit.
 
Definitions of bad credit scores vary by lender. Some even use their own scoring models to determine if applicants qualify for funding. So, it’s best to inquire about the minimum credit score requirements before applying so you’ll know what to expect. 
 

How to get a business loan with bad credit

It’s possible to get a business loan with bad credit. But you’ll have to take the proper steps to have the best chance of getting approved. 

1. Check your credit

Before applying, check your personal credit scores with the three major credit reporting agencies — Experian, TransUnion and Equifax — to know where you stand. Also, visit AnnualCreditReport.com, get a copy of your free credit reports and review them, as the information present is what makes up your credit score. 
If you have an established business, request your business credit reports and scores from Dun & Bradstreet, Experian and Equifax.  

2. Improve your credit rating

The most competitive financing terms typically go to borrowers with solid credit profiles. Even if your credit score is lower, you can take steps to improve it and position yourself for better deals on loan products. 
Start by reviewing your personal and business credit reports. If you spot errors, file disputes with the credit reporting agencies promptly to have them resolved. Other ways to improve your personal credit health include: 
  • Paying your bills on time. Payment history accounts for 35 percent of your credit score, and just one late payment can tank your credit score. Luckily, delinquent accounts aren’t reported to the credit bureaus until they are 30 days past due. This gives you ample time to work with creditors to find a payment arrangement. 
  • Bringing past-due accounts current. You must pay your bills on time. It’s equally important to get current on past-due bills and stay current to stop adverse credit reporting. 
  • Enrolling in automatic bill pay. If you often miss payment due dates, consider signing up for automatic bill payments on your loan and credit card accounts. You’ll avoid late payment penalties and negative credit reporting (assuming you have enough funds in your account to cover the monthly payment). 
  • Paying down your credit card debt. Credit utilization, or the amount of your total credit line in use, makes up 30 percent of your FICO score. Try to bring your credit utilization rate below 30 percent to improve your credit score. But if you can’t afford to pay down this much credit card debt before you need to apply for a business loan, there are other ways to reduce your credit utilization rate. You can request a credit limit increase or apply for a debt consolidation loan
  • Applying for new credit as needed. Each time you apply for credit, a hard credit inquiry is generated and can drop your credit score by a few points. Too many hard pulls in a short period can mean bad news for your credit score and signal financial distress to lenders and creditors, so it’s best to only apply for new credit on an as-needed basis. 
Most importantly, monitor your personal and business credit profiles as you take steps toward improving your credit health. 

3. Know what lenders expect

It’s best to only consider doing business with lenders that will work with your credit profile. Before you start shopping around, understand that most lenders will have certain requirements around credit scores, annual revenues, your time in business and collateral. Many lenders also evaluate your debt-to-asset ratio: the amount you owe compared to the assets you possess.

4. Shop around and be open to secured loans

Now that you know what most lenders look for, it’s time to shop around. Once you find lenders that could be accessible based on their eligibility criteria, dig a little deeper to learn more about their reputation and industry experience. Also, review their loan offerings, interest rates, loan terms, fees and funding times to decide if you want to move forward with applying. 
If you haven’t had much time to improve your credit score, be open to lenders with secured loans, as they may be your only option. If you default, the lender will seize the collateral securing your loan. This helps lenders feel more confident in lending to borrowers with less-than-ideal credit.

5. Apply with confidence

Once you’ve improved your credit rating and found the right lender, the final step is the application process. Be sure to apply for the type of loan product that best suits your business. You should also gather any information or documents the lender will need in advance, like your business plan and financial or legal documents, to ensure the application process goes smoothly. 
 

Bad credit business loans pros and cons 

As with any debt product, bad credit business loans have benefits and drawbacks to consider.
Pros 
  • Flexible eligibility criteria. Lenders offering business loans to credit-challenged borrowers typically have more leniency than you’ll find with traditional banks. 
  • Access fast cash. You can get the money your company needs quickly as some lenders offer rapid funding — sometimes the same day or in just a few business days. 
  • Helps build credit. If account activity is reported to the credit bureaus, your payment history could improve, and your score will likely increase as you repay the loan. The same applies if the lender reports to the business credit bureaus. 
Cons
  • Borrowing costs. Expect higher interest rates and fees as bad credit business loans are riskier for lenders due to the elevated chance of default. 
  • Loan limits. The amount you qualify for could be far less than what you need since the cap on business loans for bad credit borrowers may be lower. 
  • Collateral requirements. Borrowers may expect bad-credit borrowers to put up collateral. If you take out a secured loan, you could lose the collateral you put up if you fall behind on the loan payments. 

FAQs about bad credit business loans

Methodology

To choose the best business loans for bad credit, we ensured all loans featured offered eligibility with a credit score below 630 and are broadly available across the United States. We then considered features that make loans affordable and accessible to businesses with different characteristics and needs, including interest rates, required time in business, minimum annual revenue and fees. Additionally, the featured lenders were evaluated for notable features such funding speed and nontraditional eligibility criteria.