Best bad credit business loans in February 2023
Allison Martin’s work began over 10 years ago as a digital content strategist, and she’s since been published in several leading financial outlets, including The Wall Street Journal, MSN Money, MoneyTalksNews, Investopedia, Experian and Credit.com.
Helen Wilbers has been editing for Bankrate since late 2022. He values clear reporting that helps readers confidently land deals and make the best choices for their finances. He specializes in auto and small business loans.
Kenneth Chavis IV is a senior wealth manager who provides comprehensive financial planning, investment management and tax planning services to business owners, equity compensated executives, engineers, medical doctors and entertainers.
What To Know First
It can be challenging to secure funding for your business with less-than-perfect credit. But even if your options are limited, you may be in luck. Many lenders offer bad credit business loans. We’ve named the best bad credit business loans below.
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Definition of Terms
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
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To qualify for a line of credit, you’ll need a credit score of at least 600, six months in business and $180,000 in annual revenue. Your company must be based in the United States; Credibly’s website notes that some products may not be available in all states. Funding applications can be completed online or by phone; you can also prequalify online. If approved, a personal guarantee is required. You may also pay an origination fee. Funds must be used for business purposes.
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
- Accessible to borrowers with credit scores as low as 500
- Get pre-approved with a soft personal credit inquiry
- Prepayment discounts available
- 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
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Fora Financial requires a credit score of at least 500, $12,000 or more in gross monthly sales and at least three months in business. Start the application process by submitting the online form or calling the toll-free number on the website to speak with a lending expert. Funding is available in all 50 states, and you’ll receive a lending decision in just four to 24 hours. If you’re approved, the loan proceeds will be deposited into your bank account within 24 to 72 hours. Fora charges origination and wire transfer fees.
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
- 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
- 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
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The lenders in Lendio’s network require a minimum credit score of 560, $50,000 in annual revenue and six months or more in business. Both secured and unsecured lines of credit are available, but you’ll need to apply online to determine which option is the best fit for you. Select borrowers qualify for prepayment discounts if they can pay the balance in full before the loan term ends.
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
- No minimum credit score requirement
- Easily accessible for new business owners
- Low minimum annual revenue requirements
- Only available to PayPal users
- Loan fee not disclosed, which makes comparison difficult
- Loans not offered in North Dakota, South Dakota and Virginia
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To qualify for a PayPal Working Capital business loan, you’ll need a PayPal Business or Premier account that’s been active for at least 90 days. If you have a Business or Premier account, you should also have $15,000 or $20,000 in annual sales for the last year. You can apply online to receive a decision in seconds. You will be able to view PayPal’s fee once your loan is approved. Most approved applicants have access to the loan proceeds in minutes.
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
- 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
- Limited availability by location and industry
- Origination fee between 4 and 6 percent
- Steep maximum APR of 35.99 percent
-
Upstart requires borrowers to live in a state it services, have a credit score of 550 or higher, have 12 months in business and provide a personal guarantee. Its small business loans aren’t available in Iowa, Nevada, New Hampshire, Maryland and West Virginia. Furthermore, you aren't eligible to receive a small business loan if you operate a business in betting, adult entertainment, cannabis, drug paraphernalia, tobacco, weapons, multi-level marketing or a related industry.
The Bankrate guide to choosing the best business loan for bad credit
What is a bad credit score?
- Exceptional: 800-850
- Very good: 740-799
- Good: 679-739
- Fair: 580-669
- Poor: 300-579
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
2. Improve your credit rating
- 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.
3. Know what lenders expect
4. Shop around and be open to secured loans
5. Apply with confidence
Bad credit business loans pros and cons
- 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.
- 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
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Yes, getting a startup loan is possible if your credit score is on the lower end. Be mindful that you must also meet the lender’s other eligibility requirements. You may also be required to put up collateral if a secured loan is your only option.
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It depends on the lender. However, you could be eligible for a bad credit business loan with a credit score as low as 560.
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Reach out to the lender to determine why your application was denied and inquire about other loan offerings. You can also try other, more-lenient lenders or take a step back and work on your credit rating before applying again.
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.