If you and/or your business have bad credit, you're generally considered a risk by most lenders. You may have a history of late payments, defaulting on your financial obligations, and may be overburdened by debt. Some people with bad credit also have negative notes on their credit reports like collection items. According to FICO, a bad or poor credit score falls anywhere under 580. It is possible to get a small business loan even if you have bad credit. This is because your credit score doesn’t matter as much as the overall financial health of your business. Many lenders require a minimum credit score of 500, at least six months in business, and more than $30,000 in annual revenue. However, you can expect to pay higher fees and interest rates when you have bad credit as a business owner. We reviewed 19 different small business loan lenders to determine the best small business loans for bad credit. Loan terms and rates should be reasonable, so these were important considerations in our assessments. We also looked at real customer reviews, credit score requirements, and loan amounts available. The Best Small Business Loans for Bad Credit for May 2024 The Best Small Business Loans for Bad Credit for May 2024 The Bottom Line Compare Providers How to Choose Pros and Cons How to Apply Why You Should Trust Us FAQs Why We Chose It We chose LoanBuilder-PayPal as the lender with the best short-term loans because it offers loan terms between 17 and 52 weeks. Your minimum credit score to receive a loan is 580 and funding can happen as soon as the next business day. Pros & Cons Pros 580 minimum credit score Loan terms between 17 and 52 weeks Receive funds as soon as the next business day Cons Must have business revenue of $33,300 or more per year No prepayment discounts Borrowing fee due at payoff Overview PayPal is an online payment system that now offers short-term small business loans called LoanBuilder. This loan is also known as a PayPal Business Loan. Lending is through WebBank, a member of the Federal Deposit Insurance Corporation (FDIC). Loan terms are a maximum of 52 weeks, and you only need a 580 credit score to qualify. Your loan application can be completed online or on the phone in five to 10 minutes, and approval is instant. After approval, receive funding of $5,000 to $100,000 for first-time borrowers and up to $150,000 for repeat borrowers. This is transferred directly into your business bank account as soon as the next business day. Both a blanket lien and a personal guarantee are required when taking out a loan. Automatic weekly repayments come directly out of your business bank account. While you can’t adjust the frequency of repayment, you can specify which day of the week your payments come out. Should a payment fail, there’s a $20 non-sufficient funds (NSF) fee. If you make your payments regularly, you won’t pay any fees aside from a one-time borrowing fee, based on a percentage of the total loan amount—as opposed to a traditional annual percentage rate (APR). This means you won’t save any money by paying off the loan early. Why We Chose It If you need flexible financing, consider a small business line of credit with Lendio. This is the best line of credit option for small business owners with bad credit because you only need a 600 credit score, and you have no obligation to use all of your funds. Plus, you pay nothing for those unused funds. Many people consider a line of credit like a safety net—it’s there if you need it. Pros & Cons Pros 600 minimum credit score Only pay interest on the funds you use Application takes just 15 minutes Cons Must have $50,000 or more in annual revenue Funding takes one to two weeks Loan terms of only one to two years Overview Lendio is a small business lending marketplace launched in 2011 that matches businesses with 75+ different lenders to secure the funding they need. Because Lendio doesn’t originate the loan, you receive multiple offers and can pick the one that best matches your needs. Line of credit applications take 15 minutes and are a great option for businesses operating for at least six months with $50,000 in annual revenue. Business owners must have a credit score of 600 and be willing to wait up to two weeks to receive funding. Loan terms offered are one to two years. With a line of credit, you can borrow against it as often as possible, provided you don’t go over your credit limit. Borrow between $1,000 and $500,000 with interest rates of 8% to 24%. Depending on the lender you go with, they may ask for a personal guarantee. Your repayment amount and frequency depend on the final lender you choose. However, the longer you’ve been in business and the higher your credit score, the lower your payments will be. Why We Chose It OnDeck is best for repeat loans because it allows you to apply for more money after paying back half of your original loan; it also accepts minimum credit scores of 625, and same-day funding is possible. As long as you’ve been in business for over a year, have a business bank account, and at least $100,000 in annual revenue, you can apply for a loan. Pros & Cons Pros Apply for more money when you’ve paid back half of your original loan Same-day funding is possible 625 minimum credit score Cons Very high interest rates Requires daily or weekly repayment State and industry loan availability limitations Overview Launched in 2006, OnDeck is a publicly traded small business lender that works online and by phone. You only need a minimum credit score of 625 which is on par with what certain providers allow. Plus, after loan approval, you can receive your funds as soon as the same day and can receive more money after paying down half your loan. You can borrow anywhere from $5,000 to $250,000 and lines of credit from $6,000 to $100,000. The amount available to borrow depends on your business revenue. Repayment terms for term loans are up to 24 months and 12 months for a line of credit loan. On a term loan, once you’ve repaid half of the loan, you can apply for more money, and you won’t be charged any remaining interest on your existing loan. Unlike most lenders, repayments occur automatically either daily or weekly, depending on the business information you provide to OnDeck. The average APR for term loans is 55.8% and 52.6% for lines of credit. Paying off the loan early may result in your remaining interest being waived. However, this prepayment benefit option will mean a higher APR. OnDeck will also take a blanket lien on all business assets and require a personal guarantee. Why We Chose It With Rapid Finance, you can borrow up to $1 million, depending on your monthly revenue, and have loan terms of up to 60 months. This lender will look at the entire health of your business—not just your personal or business credit score—when determining if your business will qualify for funding. These reasons make it the best small business loan option for long-term financing with bad credit. Pros & Cons Pros Loan terms up to 60 months Looks at overall business health and not just a credit score Funds available within hours after approval Cons Repayment details not available online Interest rates not available online Overview Rapid Finance offers lending solutions to small and medium-sized businesses. Its site boasts excellent reviews and offers one of the longest business loan terms at 60 months (most lenders are two years or less). Plus, when you apply for a loan, you can often get approval and funding within hours. Your business must be at least three to six months old to qualify for many of its small business loans. However, other loan types, such as most of its short-term loans, require at least two years in business. A blanket lien is required. Rapid Finance advertises daily, weekly, or monthly payments, but the website offers few details beyond that. No interest rates are published online, so it is necessary to reach out to customer service for repayment details. Why We Chose It To qualify for a small business loan with Credibly, you must have revenue of at least $15,000 per month, funding is quick, and the minimum credit score is 500. That's what makes Credibly our pick as the best small business loan for businesses with high revenue. Pros & Cons Pros 500 minimum credit score Available to businesses at least six months old Offers up to $400,000 and funds as soon as the same day Cons Requires revenue of at least $15,000 per month Daily or weekly repayment Overview Credibly is a lender that launched in 2010 and offers one of the lowest minimum credit scores (500) out of all lenders we looked at. Businesses must have monthly revenue of at least $15,000 and be in business for at least six months. You’ll also have higher fees than with other lenders. Choose from several different types of small business loans: Depending on which Credibly loan product you choose, you can borrow up to $400,000 and have loan terms of up to 24 months. Credibly charges a 2.5% origination fee in addition to your factor rate. This factor rate starts at 1.11. This means on a $10,000 loan with a factor rate of 1.11, you will pay a $1,100 fee, in addition to the 2.5% origination fee, on a $10,000 loan. Small business loans help you expand operations, cover payroll, pay for supplies, and manage cash flow. When you have poor credit, finding a lender can be difficult, but there are many loan options available with credit scores as low as 500. Some lenders don’t even have a minimum score and, instead, look at overall business health. We recommend PayPal if you want a short-term loan because it offers terms as short as 17 weeks. Lendio is excellent if you need a line of credit, while OnDeck is useful if you expect to apply for more money later. Check out the other lenders on our list for other situations, like Credibly if you have high revenue or Rapid Finance if you need long-term financing. A small business loan for bad credit is a loan that is meant for business owners with too many outstanding debts and a history of paying their bills late or not paying them at all. A bad credit history may also include other negative factors like collection items. According to FICO, a poor credit score is anything under 580. Small business loans for bad credit often come with higher interest rates because the borrower is considered a lending risk. Keeping up with the payments and making them on time may help a borrower with bad credit bump up their credit score According to FICO, a bad credit score "is well below the average score of U.S. consumers and demonstrates to lenders that the borrower may be a risk." The table below highlights each rating and the score range as per FICO. Pros Fund your growth Lets you build your credit Approval and funding times Cons Higher rates and fees Lower loan amounts Collateral required Applying for a small business loan when you have bad credit is similar to applying for any other type of loan. You have to complete an application online, over the phone, or in person with your lender. As with any other loan, your lender may ask for supporting material to advance your application, including: Keep in mind that it may take longer to approve an application for a small business loan for bad credit because of the underwriting process. That's because there may be more paperwork and documents with the application that the team has to go through before a decision can be made. In most cases, people with bad credit must put up collateral to secure the loan, so be prepared to offer some form of security if you want to be approved. We looked at 19 of the best small business loans available and narrowed it down to the five best options for bad credit based on several features and considerations. We considered rates, credit score requirements, loan amounts, and repayment terms. Reviews of customer service, sales, and ease of use weighed heavily into our decision—obtaining a small business loan should be a pleasant, stress-free experience for business owners. We used this data to review each company to provide unbiased, comprehensive reviews to ensure our readers make the right decision for their needs. Investopedia launched in 1999 and has helped millions of readers around the world become educated on personal finance issues. Yes, it’s possible to get a business loan with bad credit. Some lenders don’t have a minimum credit score and look at the business's overall health instead. However, you can expect to pay higher fees or have a higher APR if you have bad credit. The easier business loan to get is one that is secured. This means the loan is backed by collateral, and the lender gets that collateral if the business owner defaults on the loan. The collateral pledged usually includes property, inventory, equipment, savings accounts, blanket liens, and personal guarantees. The Small Business Association does not specify a minimum credit score required to secure an SBA loan. However, SBA loans are provided by lenders who may have minimum score requirements. Typically, this minimum is about 620. However, the higher your score, the more likely you are to receive approval. That depends on the lender. Some lenders may review your personal credit score when you apply for a business loan, especially for new or small businesses. If you miss payments or default on the loan altogether, your lender may report it on your personal credit report. Applying for a business loan can be more difficult and time-consuming than a personal loan. But, understanding what the lender needs and having all your documents can often make the process run more smoothly. While the requirements may vary based on the lender, there are some factors that all of them want to review, including: No, you cannot and should not use your business loan for anything other than its intended purpose. This includes paying any personal debts or obligations you may have. You could run into legal troubles if your lender finds out. They may declare that your loan is in default and recall the loan. A personal guarantee means that the business owner assumes the business debt in the event the business is unable to repay it. This helps protect the lender in the event of default and also makes it easier for a business to qualify for a loan when they might not have it without a personal guarantee. Understanding why you have a bad credit score is the first step to turning it around. Your credit score may have plummeted because you failed to pay your bills on time, defaulted on your debt, and you may have too much debt. Collection items and other negative notes on your credit report also impact your credit score. To improve your credit score, bring all of your past-due accounts up to date. Ensure you make your payments on time and keep the amount of debt you have as low as possible. Pay off your debt as soon as possible if you can. Review your credit report regularly to spot any irregularities and dispute any errors. If you can't seem to find relief, contact a financial professional who can help you. For instance, credit counseling is a great way to help you get your credit score back on track. Article Sources Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in oureditorial policy. myFICO. "What is a Credit Score?" LoanBuilder. "LoanBuilder Loan." LoanBuilder. "Why a LoanBuilder Loan?" Lendio. "Find the best business line of credit for your business." Lendio. "Frequently Asked Question," Select "When was Lendio founded?" Lendio. "About Lendio." Lendio. "Business Line of Credit." OnDeck. "Grow your business — on your own terms." OnDeck. "OnDeck's Top 10 FAQs: Answered." OnDeck. "About Us." OnDeck. "Short Term Loans for Small Business." Rapid Finance. "A fast approach to business financing." Rapid Finance. "Small Business Loans for All Your Business Needs." Rapid Finance. "Small Business Loan Financing." Credibly. "Small business loans without the hoops." Credibly. "Fast Business Loans." Credibly. "Fast Business Loans," Select "Merchant Cash Advance." Credibly. "Contact Credibly." Credibly. "Small Business Loans and Financing." Credibly. "Business loans for working capital." Fed Small Business. "The Small Business Credit Survey, 2021 Report on Employer Firms," Page 22. Related Terms Voidable Contract: Definition, How It Works, and Examples A voidable contract is a formal agreement between two parties that may be rendered unenforceable for qualified legal reasons. It is different from a void contract. more Engagement Letter: What It Is, How It Works, and Why It's Important An engagement letter is a written document. It is used to define the business relationship to be entered into by a client and a company. Learn more about how it works. more Low-Income Housing Tax Credit (LITHC): How It Works The Low-Income Housing Tax Credit (LIHTC) provides a financial incentive for developers to build, buy, and renovate rental housing for low-income taxpayers. more Accumulated Earnings Tax: Definition and Exemptions The accumulated earnings tax is imposed on certain corporations that have retained earnings deemed to be excessive for their reasonable business needs. more Constructive Receipt: Definition, How It Works, and Example Constructive receipt occurs when cash hasn't been physically received but individuals or businesses can control or utilize the money. Taxes are owed on such income. more Business Tax Credits: Meaning, How They Work, Example Business tax credits reduce a business’ tax liability dollar-for-dollar and are offered as a result of specific activities. They are different from tax deductions. moreThe Best Small Business Loans for Bad Credit for May 2024
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Best Short-Term Loans : LoanBuilder-PayPal
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Best Line of Credit : Lendio
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Best for Repeat Loans : OnDeck
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Best for Long-Term Financing : Rapid Finance
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Best for High Revenue : Credibly
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The Bottom Line
Compare the Best Small Business Loans for Bad Credit
Small Business Loan Best For Minimum Credit Score Processing Time Terms Available LoanBuilder-PayPal Best Short-Term Loans 580 Next business day 17-52 weeks Lendio Best Line of Credit 600 Up to one to two weeks Six months to two years OnDeck Best for Repeat Loans 625 Same-day Up to 24 months Rapid Finance Best for Long-Term Financing Not considered Within hours Up to 60 months Credibly Best for High Revenue 500 As soon as same-day Up to 24 months Guide to Choosing a Small Business Loan for Bad Credit
What Is a Small Business Loan for Bad Credit?
What Is a Bad Credit Score?
FICO Credit Score Ranges Rating Score Range Exceptional 800+ Very Good 740 to 799 Good 670 to 739 Fair 580 to 669 Bad or Poor Under 580 No Credit Not enough information to score Pros and Cons of Small Business Loans for Bad Credit
Pros Explained
Cons Explained
How to Apply for a Small Business Loan for Bad Credit
Why You Should Trust Us
Frequently Asked Questions
Can You Get a Business Loan With Bad Credit?
What Is the Easiest Business Loan to Get?
What Is the Minimum Credit Score for an SBA Loan?
Does a Business Loan Application Affect my Personal Credit Score?
What Do You Need to Qualify for a Business Loan?
Can I Use a Business Loan for Personal Reasons?
What Is a Personal Guarantee?
How Can I Fix my Bad Credit Score?
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