Best Startup Business Loans for Bad Credit (2023)

Online lenders can offer startup business loans for bad credit, but they may be expensive. You should make sure your new business can handle the potential costs of any debt before taking it on.

Online lenders usually won’t require you to put up collateral to overcome poor credit and get funding. But startups will typically need at least six months in operation and a track record of generating revenue during that time. Reputable lenders won’t offer guaranteed approval.

Below, compare some of the best startup business loans for bad credit — defined by FICO as a score from 300 to 629. Plus, learn more about alternatives if you can’t qualify for a small-business loan until your company grows.

What is a bad credit score?

A bad credit score typically ranges from 300 to 629, according to FICO and VantageScore, the most common scoring models. Scores of 630 to 689 are considered fair credit.

Although small-business lenders may have their own criteria to define bad credit, bad-credit business loans usually target borrowers with FICO scores below 630.

Where to get a startup business loan with bad credit

Banks and other traditional lenders often won’t lend to startups, especially those with bad credit, because these businesses don’t have an established financial history to prove they can repay their debts. Online lenders generally require one year in business; banks often ask for two or more.

(Video) How To Get A Startup Business Loan With Bad Credit

It is possible to get a startup business loan with bad credit, but options will be limited — and potentially costly. Here are some choices to consider.

Online lenders

Online lenders may offer startup business loans to companies less than a year old or those whose owners have lower credit scores. Generally, these loans will have high annual percentage rates because startup borrowers with bad credit are seen as riskier for the lender.

To qualify, your startup will need to be generating income already. For example, the Fundbox line of credit requires at least $8,333 in monthly revenue. You don’t usually have to provide collateral for these loans, though lenders may ask for a personal guarantee.

Online lenders may offer different types of business loans, such as short-term loans, business lines of credit and invoice financing. Some also offer merchant cash advances, where you receive a lump sum of capital and repay it with a percentage of your credit card sales. However, because of their effect on cash flow and high costs (APRs can reach 350%), you’ll want to consider all other options before turning to an MCA.

» MORE: Compare the best startup business lines of credit

Community development financial institutions

Community development financial institutions, or CDFIs, receive funding to help underserved communities. Startups that lack resources, opportunity or financial access may be able to get a business loan from a CDFI, even with bad credit.

Because CDFIs are typically banks and credit unions, they may offer competitive rates if you can qualify. However, approvals can take time, so your business will need to be able to wait for funding.

You can find a full list of community development institutions in your state on the CDFI Fund website.


Similar to CDFIs, microlenders often focus on providing capital to traditionally underserved individuals, such as minority business owners, who may be underbanked and have insufficient credit. If you qualify, a microloan can be a good choice for bad-credit startups with small funding gaps. Loans are usually $50,000 or less.

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Some microlenders also issue loans through the SBA microloan program, which is specifically designed to help women, low-income, veteran and minority entrepreneurs, as well as startups and microbusinesses. Although rates and terms can vary based on the microlender, the program typically offers competitive interest rates and terms up to seven years.

Merchant financing companies

Merchant financing is usually provided by the company that processes your credit or debit card sales, like PayPal or Square. It’s generally easier to qualify for than a business loan — for instance, PayPal only considers your sales history, not your credit score, when offering its working capital loans. The lender takes a fixed percentage of your sales until the loan is paid off.

Merchant financing may be an option for businesses with consistent revenue but bad credit. But it’s usually much more expensive than online business loans or microloans, so we recommend looking into other options first.

How to get startup business loans with bad credit

1. Evaluate your business’s credentials

In order to determine what type of business loan you can qualify for, you should check your personal credit score as well as pull your company’s financial documents, such as bank statements and balance sheets.

Although eligibility requirements vary by lender, you’ll typically want to have a minimum credit score of 600, at least six months in operation and consistent revenue to qualify for a startup business loan.

2. Research and compare lenders

Generally, online lenders will offer the most options for startup business loans for bad credit. You may also find CDFIs or microlenders that are willing to work with your business. You’ll want to make sure that you understand the lender’s product offering and eligibility requirements before applying.

» MORE: Business loan calculator: Interest rate and payments

(Video) Best Small Business Loans For Bad Credit (450+ Credit Score Approval) - Same Day Funding

3. Watch out for startup business loans with no credit check

Be wary of any lender that advertises guaranteed approval or startup loans with no credit check. At best, those may be expensive products. At worst, they could signal predatory lenders that will potentially hurt your new company more than help it.

4. Submit your application

Depending on your lender, you’ll submit your business loan application online, over the phone or in person. Lenders will typically consider your personal credit score, financial history and time in business as part of the underwriting process and ask you to provide:

  • Business and personal bank statements.

  • Business and personal tax returns.

  • Business financial statements, such as a profit and loss statement or a balance sheet.

You may also be required to sign a personal guarantee. Although you may not need to provide physical collateral to secure your loan, doing so will likely help you access more competitive interest rates and repayment terms.

Some online lenders can issue financing within 24 hours, whereas other lenders may take longer to approve and fund loans. Before signing a business loan agreement, you should compare any and all loan offers you receive to make sure you’re getting the best deal for your company.

5. Improve your credit

Improving your credit can help expand your financing options (e.g., SBA loans, bank loans) and access better rates and terms as your company grows. Ways to build credit include paying down debt and fixing mistakes in your credit report.

Startups can also look to build business credit through actions like updating business information and uploading financial statements to business credit bureaus.

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Alternatives for bad-credit borrowers

Startups with bad credit may have more difficulty getting traditional business loans. If you’re looking for an alternative small-business financing option, here are some to consider.

For startups that haven’t generated revenue yet:

  • Personal business loans. If your startup isn’t eligible for any form of financing, you could consider a personal loan. These loans are credit-dependent, but options are available for borrowers with bad credit. And lenders only consider your personal financial profile, not your business history, when evaluating your application.

  • Business credit cards. If your credit is at the high end of what’s considered a bad score (below 630), you may be able to qualify for a business credit card. You can apply for a business credit card as a true startup — before you’ve generated any revenue at all — though card issuers may give more weight to your personal finances in those cases.

  • Crowdfunding. If you’re still preparing to launch your business idea, you might try raising funds with crowdfunding — where donors receive a product or service related to your business in exchange for their contribution.

In addition to the options above, startups with consistent early revenue but bad credit may also want to consider:

  • Small business grants. Instead of debt-based financing, you might apply for small-business grants that you don’t have to repay. Applying for grants can be competitive and time-consuming, but the payoff can be worth it if you secure one. Plus, there are startup business grant options. Grant issuers want to support businesses that will last, so they typically look for evidence that a business idea will succeed.

  • Selling equity. Another alternative to debt financing is selling equity — or shares of your business — to investors, friends or family. This is typically a good option for tech businesses and fast-growing startups, but other businesses might use an equity crowdfunding platform to reach their funding goal. Investors will probably want to review your business plan and may be more likely to invest if you can show strong early results.

Compare more small-business loan options

(Video) How To Get Business Funding With Bad Credit & No Sales History: I DID IT!!

The best business loan is generally the one with the lowest rates and most ideal terms. But other factors — like time to fund and your business’s qualifications — can help determine which option you should choose. NerdWallet recommends comparing small-business loans to find the right fit for your business.


Can I get a start up business loan with a 500 credit score? ›

Having impaired credit may limit your options for business financing. Fortunately, certain lenders offer bad credit business loans to those with credit scores as low as 500. Lenders use your credit score as a measure of creditworthiness — the lower the score, the higher the risk.

What credit score is needed for a business start up loan? ›

If you can reach a score of 740 or higher, you'll likely get approved for the best terms the lender offers. SBA lenders: Aim for a credit score in the mid-600s to qualify for an SBA term loan. Online lenders: You won't need perfect credit to qualify for a business loan from an alternative lender.

Can someone with bad credit get a small business loan? ›

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 overall health of the business instead. However, you can expect to pay higher fees or have a higher APR if you have bad credit.

Can I get a business loan with a 450 credit score? ›

What is the minimum credit score to get a business loan? Clarify recommends that borrowers have a credit score of at least 550. If your credit score is below 550, however, don't let that stop you from considering business loans as a financing option.

Can I get a business loan with my EIN number? ›

Can I Get a Loan with Just My Business EIN? Yes, there are certain circumstances where a lender will not use your personal credit score, but only your EIN as a factor in lending to you. Note that they won't just use your EIN in isolation, as there are many factors that go into qualifying for a small business loan.

What is the easiest SBA loan to get? ›

SBA Express

This term loan or line of credit offers fixed or variable SBA loan rates as well as the easiest SBA application process, quick approval times, flexible terms, and lower down payment requirements than conventional loans.

How do I get money to start my own business? ›

  1. Determine how much funding you'll need.
  2. Fund your business yourself with self-funding.
  3. Get venture capital from investors.
  4. Use crowdfunding to fund your business.
  5. Get a small business loan.
  6. Use Lender Match to find lenders who offer SBA-guaranteed loans.
  7. SBA investment programs.

What is the minimum credit score for SBA? ›

The SBA does not state specific credit score minimum requirements, but business mentors recommend entrepreneurs have a credit score in the mid to high 600s. Some loan products, like the SBA microloan program, may have SBA loan credit requirements on the lower end.

What disqualifies you from getting a business loan? ›

Ineligible businesses include those engaged in illegal activities, loan packaging, speculation, multi-sales distribution, gambling, investment or lending, or where the owner is on parole.

Can I get a business loan with a 550 credit score? ›

Eligibility: To qualify for a Rapid Finance business loan, prospective borrowers must have a minimum credit score of 550, be in business for at least six months and have at least $5,000 in monthly revenue.

How can I get a business loan with bad credit and no money? ›

SBA Loan

The Small Business Administration (SBA) loans are government-backed loans that are available to businesses with bad credit. Although the interest rates can be higher than what you would get from a private lender, SBA loans are often more lenient and may require collateral.

Who is eligible for start up loan? ›

Eligibility Criteria for Startup Business Loan

You should have a CIBIL score of at least 700. Your business should have been operational for at least 2 years. Minimum annual income of your business should be INR 2 lakhs. Should be between 21 years to 65 years of age.

Is it hard to get a small business start up loan? ›

Getting a startup business loan can be more difficult than getting approved for financing as an established business. This is because most lenders gauge their risk of borrowing based on the financial stability and history of an applicant's business.

Is it difficult to get a business startup loan? ›

If you're a startup business, getting a term loan or line of credit can be difficult. You generally won't have any track record to show the bank you're profitable and can make repayments.

What are the easiest loans to get approved for? ›

The easiest loans to get approved for are payday loans, car title loans, pawnshop loans and personal loans with no credit check. These types of loans offer quick funding and have minimal requirements, so they're available to people with bad credit.

Are there any loans for 500 credit score? ›

The best personal loans for a 500 credit score are from OppLoans and Integra Credit. These companies specialize in lending to people with bad credit and won't even do a credit check when you apply for a loan.

How do I fund a business with no money? ›

Options to fund your new business venture include:
  1. Crowdfunding. This approach to raising money takes small amounts of cash from a large number of people. ...
  2. Friends and family loans. Do you have a personal support network that can back your new business idea? ...
  3. Small business loans. ...
  4. Capital investors. ...
  5. Small business grants.
Nov 25, 2022

Can you build business credit with just EIN? ›

Using an EIN can help a business establish a credit history over time, as long as the card issuer reports payments to business credit-rating agencies. Your business credit reflects how well you manage your finances and pay your debt.

How do I build my business credit with my EIN number? ›

Establish credit trade accounts with several companies that offer revolving credit lines. Use your EIN when filling out applications, charge what you need and then pay the amount in full and before the due date to establish good credit. Companies like Dell, Staples and Lowe's often work with new businesses.

Can I get a business credit card with my EIN number? ›

Most card issuers require you to provide your Social Security number when applying for a business credit card. Corporate cards are the exception. You can typically get these cards using just your business's employer identification number, or EIN.

Can I get an SBA loan with no money? ›

But the SBA offers several no money down small business loan programs, including the SBA Microloan. As you can guess from its name, borrowers will receive smaller loans through the microloan program—the SBA allows intermediary lenders to fund microloans of up to $50,000, but the average amount is $13,000.

Do people get denied for SBA loans? ›

Even after you've been through the application process, it's possible that your SBA loan will be disqualified or denied. If that happens, you'll have questions—and we're here with the answers.

Does everyone get approved for SBA? ›

In general, eligibility is based on what a business does to receive its income, the character of its ownership, and where the business operates. Normally, businesses must meet SBA size standards, be able to repay, and have a sound business purpose. Even those with bad credit may qualify for startup funding.

Is PPP money still available? ›

The PPP ended on May 31, 2021. Existing borrowers may be eligible for PPP loan forgiveness. SBA also offers additional COVID-19 relief.

Does the government give money to start a business? ›

No Federal Grants for Businesses

The federal government does not offer grants for starting or growing a business. It only provides grants for nonprofit and educational institutions.

What is the average amount of money needed to start a small business? ›

According to the U.S. Small Business Administration, most microbusinesses cost around $3,000 to start, while most home-based franchises cost $2,000 to $5,000. While every type of business has its own financing needs, experts have some tips to help you figure out how much cash you'll require.

Can I get a SBA loan with a 570 credit score? ›

For the SBA 7(a), this means a minimum score of approximately 640. But you'll increase your chances to be approved for an SBA loan with a minimum credit score of 680 or higher.

How long does it take for SBA loan approval? ›

The SBA loan approval process takes 30 to 90 days from application to funding. However, this time frame varies by lender and loan type. The exact steps for getting an SBA loan can also differ from lender to lender, but there are a few general stages in the approval process: Loan application.

Does SBA run a credit check? ›

The SBA uses the FICO Small Business Scoring Service, or SBSS, in many cases to evaluate the credit history of your business. SBSS scores get pulled for SBA 7(a) loan application prescreens as well.

Why are SBA loans so hard to get? ›

Low credit scores are a common reason why it's difficult to get an SBA loan. Banks are risk-averse, and usually, require borrowers to have a FICO score above 650. They may consider both your personal credit score and your business credit score.

What do banks look at when approving business loans? ›

They'll consider household income, business revenue, cash flow, outstanding debt, unused credit lines, and the amount of money the owner has personally invested into the business. All these variables will help lenders calculate the ability for an owner to repay the loan.

How much can you get for a startup business loan? ›

Startup loans typically range from $9,000 to $20,000. You can be funded for as little as $500 or for as much as $750,000 (though you'll need a large personal income for a loan that size). Startup loan decisions are made differently from other forms of business financing.

What is the average credit score for a small business loan? ›

640 to 700: Business loan providers generally consider a credit score that falls somewhere between 640 and 700 to be good but not excellent. Generally, the minimum credit score for SBA and term loans is around 680.

What credit do you need for SBA 504 loan? ›

Small business owners get between 10 and 25 years to repay the loan. Additional eligibility requirements include a two-year minimum business history, personal credit scores of 660 or higher, sufficient business and personal cash flow that can be demonstrated by three years of tax records and financial reports.

What percentage do you need to put down for a business loan? ›

How much down payment is needed for a business loan?
Type of LoanRequired Down Payment
USDA Business & Industry Loan20%-25%
Traditional Bank Loan20%-30%
Online Loan10%-30%
Construction Loan20%-30%
13 more rows
Jun 30, 2022

What percentage of small business loans are declined with bad credit? ›

The NSBA Small Business Access to Capital study found that 20% of small business loans have been denied due to poor business credit.

How can I start my own business with no money? ›

Options to fund your new business venture include:
  1. Crowdfunding. This approach to raising money takes small amounts of cash from a large number of people. ...
  2. Friends and family loans. Do you have a personal support network that can back your new business idea? ...
  3. Small business loans. ...
  4. Capital investors. ...
  5. Small business grants.
Nov 25, 2022

Is it hard to get a loan to start a small business? ›

Getting a startup business loan can be more difficult than getting approved for financing as an established business. This is because most lenders gauge their risk of borrowing based on the financial stability and history of an applicant's business.

What is the easiest loan to get approved for? ›

The easiest loans to get approved for are payday loans, car title loans, pawnshop loans and personal loans with no credit check. These types of loans offer quick funding and have minimal requirements, so they're available to people with bad credit.

What business is the easiest to start? ›

Business ideas that are easy to start quickly
  1. Yard work. People with 9-to-5 jobs don't always want to spend their weekends doing yard work. ...
  2. Software training. ...
  3. Homemade soap making. ...
  4. Errand service. ...
  5. Social media management. ...
  6. Freelance services. ...
  7. Selling on eBay. ...
  8. Pet sitting.

What is the easiest business to start with no money? ›

26 Businesses You Can Start for Free
  1. Blogging. While not a new concept, monetized blogging is always a popular option for an essentially no-cost business. ...
  2. In-home child care. ...
  3. In-home dog care. ...
  4. Pet services. ...
  5. Dog training. ...
  6. Freelance writing. ...
  7. Freelance editing. ...
  8. Resume building.

What is the easiest way to start a small business? ›

  1. Conduct market research. Market research will tell you if there's an opportunity to turn your idea into a successful business. ...
  2. Write your business plan. ...
  3. Fund your business. ...
  4. Pick your business location. ...
  5. Choose a business structure. ...
  6. Choose your business name. ...
  7. Register your business. ...
  8. Get federal and state tax IDs.

Do banks give loans to startups? ›

So yes, banks do make loans to startups – provided they demonstrate the ability to repay them. Generally, that means: Strong collateral. Lenders expect borrowers to put up something – usually their home or other significant asset.

Can I get a loan if I just started a business? ›

Startup business loans can help new entrepreneurs cover startup costs — including equipment, inventory, payroll, utilities and insurance. Although it may be more difficult for startups to qualify for traditional business loans, some online lenders offer capital to borrowers with one year or less in business.

Is it hard to get a business loan with an LLC? ›

If you have good credit and can meet the lender's eligibility guidelines, getting a business loan with an LLC can often be easy. But new businesses and businesses with limited revenue may have difficulty getting approved, especially with traditional banks and credit unions.


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