8 Best Small Business Loans for Bad Credit

Are you looking to apply for a small business loan, but you're worried about qualifying because of a few hits on your credit rating? There are multiple opportunities for applicants with less-than-stellar credit to find business loans.

If you have poor or limited credit and need a small business loan, it's important to identify the best options to help you start a new business, fund a franchise or purchase equipment for your existing business.

We reviewed the companies offering small business loans for people with bad credit. Let’s dig into the details and learn how to get prepared for funding when you need it.

Our Top Picks for Best Small Business Loans for Bad Credit

• Credibly — Best Overall
• OnDeck — Best for Short-Term Loans
• Rapid Finance — Best for Holistic Approach
• PayPal — Best for Lowest Fees
• Fora Financial — Best for New Businesses
• Biz2Credit — Best for Alternative Financing
• Fundbox — Best for Quick Funding
• Lendio — Best Lender Marketplace

Best Small Business Loans for Bad Credit Reviews

Why we chose it: Highly reviewed customer communications by staff and quick delivery of funds brings Credibly to the top of our list.

Credibly can be a good option for individuals with bad credit, offering short-term loans with repayment terms of up to 15 months. Loan amounts range from $5,000 to $400,000, and they have a quick online application process that can get you approved for funding in as little as 48 hours. Credibly also offers flexible repayment plans for paying daily or weekly, depending on business cash flow. More than 87% of Trustpilot reviews give Credibly five stars.

Why we chose it: OnDeck was our top pick for best short-term loans for its numerous lending products and speedy funding, which can be received on the same day. OnDeck provides term loans ranging from $5,000 to $250,000, with repayment terms that can extend up to 24 months.

Speed is of the essence at OnDeck, where borrowers with bad credit can often get approved in under 24 hours. While the loan rates are high, OnDeck works with borrowers to help with a loan, with amounts that range from $5,000 to $250,000.

OnDeck’s line of credit is also available for small business owners with bad credit with credit amounts from $6,000 to $100,000 and repayment terms from 12 to 24 months.

Why we chose it: As an alternative lender, Rapid Finance takes a more holistic approach to evaluating borrowers, considering factors beyond just credit score. For that reason, Rapid Finance may be able to offer a cash solution to businesses struggling to secure financing through traditional channels.

Rapid Finance can be an attractive option for borrowers. The lender looks at more than a borrower’s credit score: It will review a bad credit borrower’s business history, which may involve seeking information about the money a business makes, its length of business operation, current accounts receivables and overall business credit history. Applicants may hear back within 24 hours if they provide all the necessary information upfront.

Why we chose it: PayPal is well known for money transfers all over the globe — but more small businesses are using its bad credit loans for small businesses.

PayPal may be a suitable option for small business borrowers with bad credit. Some of the eligibility requirements are having a PayPal account and operating the business for a minimum of nine months with at least $33,300 anticipated annual revenue. However, borrowers can avoid additional fees and charges, as PayPal does not charge origination fees or prepayment penalties.

Why we chose it: Fora Financial has attributes that make it a good fit for small businesses looking for alternatives to traditional bank financing.

Fora Financial says it offers short-term loans from $5,000 to $1.5 million. Fora Financial requires borrowers to have been in business for a minimum of six months, where most traditional lenders want a business to have been in operation for at least a year. This can help young businesses or startups.

Fora Financial uses a factor rate to calculate its fees, which is a common practice among invoice factoring and merchant cash advance providers. The factor rate is expressed as a fraction of the loan amount and ranges from 1.1 to 1.9. So if you take out a loan of $30,000 with a term length of 18 months, paid weekly at the maximum factor rate, you would owe $57,000. That's an APR of more than 290% and a whopping $27,000 in interest.

Why we chose it: Biz2Credit also has attributes that make it a good fit for small businesses looking for funding from alternative means instead of traditional bank financing.

Biz2Credit offers several loans for small business operators with bad credit. Eligibility requirements for working capital loans include a credit score of 660 or higher, at least 18 months in operation and minimum annual revenue of $250,000. Term loans require a 660 credit score and 18 months in operation.

When borrowing from Biz2Credit with a working capital loan, be prepared to pay daily and weekly repayments for the cash funding you receive. Biz2Credit strips away the standard loan term period, and instead keeps an eye on revenues to adjust payments back on the loan term.

Why we chose it: Fundbox made the list for being quick with bad credit small business loans applications and cash disbursements. Fundbox offers 12- and 24-week loans and is known to help businesses who need funds quickly. Applicants can be approved the same day, with funding in the next 24 hours.

Fundbox has also made a name for itself in the online lending arena for offering loans to small businesses that have been in business for only three months. Businesses must have a business checking account and have at least $100,000 in revenue.

Why we chose it: Lendio partners with more than two dozen different lenders. If you’re a small business seeking a bad credit small business loan, Lendio checks your applications and offers loan options from these lender partners. Lendio receives generally high (4.8) ratings on Trustpilot.

Lendio is an online marketplace that offers various types of loans to small businesses with bad credit from a variety of financial institutions. If you can provide three months of bank statements and show a credit score of 580 or higher, you may be able to obtain a loan from Lendio.

Other companies we considered

SmartBiz

SmartBiz loans may be attractive to you, but beware the referral and packaging fees. You may find an additional 3% referral fee on your bank term loan, as well as an added 3% packaging fee, plus closing costs. Like Lendio, SmartBiz is an online marketplace, offering loans with partner lenders that you might be able to get directly through the lender at better rates.

American Express®️ Business Line of Credit™

American Express®️ Business Line of Credit™, formerly known as Kabbage, may be an option if you are already an American Express®️ cardmember. If you're not a cardholder, you can still apply online for an American Express®️ Business Line of Credit™. American Express®️ will have to do a hard pull on your credit, which will show up on your credit report, to obtain reports from consumer and commercial reporting agencies. Expect the lender to gather and verify information about your business.

This information has not been reviewed/updated by American Express®️ since 10/15/24.

American Express®️ Business Line of Credit™ offers two loan types, installment loans and single repayment loans for eligible borrowers. All loan term types, loan term lengths, and pricing are subject to eligibility requirements, application, and final approval. This [content / article] contains general information about the American Express®️ Business Line of Credit™ installment loan type only.

Small Business Loans for Bad Credit Guide

Main things to know before choosing small business loans for bad credit

Before choosing a small business loan for bad credit, keep these tips in mind:

1. It’s important to know your credit score before applying for a loan. Lenders may have different requirements for what they consider a bad credit score, and knowing your score can help you target lenders that are more likely to approve your application. Follow Money's tips to improve your credit score as needed.
2. Look for lenders that specialize in loans for bad credit to save yourself time and effort. With the right preparation, lenders may be more willing to offer better loan terms.
3. Know the different types of small business loans available, like term loans, lines of credit and merchant cash advances. Each has its own advantages and disadvantages to fit your specific business needs.
4. Stay on top of interest rates and fees, as they may be higher on loans for low-credit applicants. These can impact the total cost of the loan.
5. Have all your business paperwork ready to show if requested. Having a solid business plan can help convince lenders that you are a good investment, even if your credit score is less than perfect. Be ready to provide collateral if asked: Some lenders may require collateral, such as property or equipment, to secure the loan.

Some may choose to borrow from the best banks for small business loans. Limited liability companies may want to seek out the best LLC loans that fit their situation.

What are the average fees of small business loans for bad credit?

Fees associated with small business loans for bad credit can vary, depending on the lender, the type of loan and the specific loan terms. Borrowers with bad credit typically face higher fees than those with good credit. Here are some common fees associated with small business loans for bad credit:

1. Interest rates for bad credit loans can range from 10% to 30% or higher, with variable or fixed interest rates. Note: Fixed rates are usually higher than variable rates.
2. Origination fees cover the cost of processing the loan and typically range from 1% to 8% of the loan amount.
3. Late payment fees will often be charged, and can be a flat fee or a percentage (as much as 5%) of the owed amount if you are late on your loan payments.
4. Prepayment fees may be assessed if you pay off your loan early. These fees can be based on a percentage of the remaining balance or a flat fee.
5. Underwriting fees cover the cost of evaluating your loan application. This can add hundreds or even a few thousands of dollars to your loan amount.

Small business owners need to check the details on any loan agreement and closely read the fine print to fully understand the total cost of the loan before accepting it. Using our list above can help you determine which lenders have the right loan with the most favorable terms and fees for your business.

Some business owners may want to add insurance on top of the loan, and finding the best small business insurance can help your overall strategy.

How do small business loans for bad credit work?

Small business loans for bad credit work similarly to other types of business loans, but they're designed to help businesses with poor credit histories. Here are the steps involved in getting a small business loan for bad credit:

1. Research lenders that offer small business loans for bad credit. Look for lenders that have experience working with businesses in your industry and that offer loan terms that are suitable for your needs.
2. Check your credit score. Before applying for a loan, check your credit score so you know where you stand. This will help you determine which lenders are likely to work with you and what types of loans you may qualify for.
3. Gather documentation. Lenders will typically require documentation to verify your business's financial information, such as tax returns, bank statements and financial statements. Have these ready upon request.
4. Apply for a loan. Submit your loan application to the lender you have chosen. Your application will be evaluated based on factors such as your credit score, revenue and cash flow.
5. Review loan offers. If your loan application is approved, you will receive one or more loan offers. Review each offer carefully, paying attention to the interest rates, fees and repayment terms.
6. Accept an offer. Choose the loan offer that best meets your business's needs and accept it. Be sure to review the loan agreement carefully and ask any questions you may have before signing.
7. Receive funds. Once you've accepted a loan offer and signed the loan agreement, the funds will be deposited into your business's bank account. Make sure you use the funds according to the terms of the loan agreement.
8. Repay the loan. Make timely payments on your loan according to the repayment schedule outlined in your loan agreement. This can help improve your credit score and make it easier to obtain financing in the future.

What are the requirements to apply for a small business loan for bad credit?

The requirements to apply for a small business loan for bad credit can vary depending on the lender and the type of loan you're applying for. Here are some common requirements that lenders may look for:

1. Credit score: Generally, a credit score of 500 to 550 or higher is needed as a minimum for most lenders to qualify for a bad credit business loan.
2. Business history: Lenders will want to see your business with at least six months to two years of operation to be considered for a small business loan.
3. Revenue: Lenders will typically require that your business have a minimum amount of revenue, such as $50,000 per year or more.
4. Cash flow: Lenders will want to see evidence that your business has positive cash flow and can make timely loan payments.
5. Business plan: Some lenders may require a detailed business plan that outlines your business's goals, strategies and financial projections.
6. Personal guarantees: Lenders may require personal guarantees from the business owner or other parties involved in the loan to ensure that the loan will be repaid.

How We Found the Best Small Business Loans for Bad Credit

To compile this list of the best business loans and lenders, we looked for lenders that offer online loan applications to small businesses with bad credit. We checked out reviews on Trustpilot for these lenders, and we visited websites and review sites to verify average credit scores needed for small businesses with bad credit.

Summary of Money’s Best Small Business Loans for Bad Credit

For small business owners with bad credit, it's smart to shop around for the best loan options.

Following this guide can steer you into the right things to look for, such as amount of money sought, minimum credit score criteria, length of time in business activity and other areas.

With the imbalance of small regional banks in the marketplace, looking to a specific lender other than a bank may be the right move for a small business. For better value loans in the future, consider focusing on strategies that will increase your credit score.

Summary of Money’s Best Small Business Loans for Bad Credit of 2023

• Credibly — Best Overall
• OnDeck — Best for Short-Term Loans
• Rapid Finance — Best for Holistic Approach
• PayPal — Best for Lowest Fees
• Fora Financial — Best for New Businesses
• Biz2Credit — Best for Alternative Financing
• Fundbox — Best for Quick Funding
• Lendio — Best Lender Marketplace

*Disclosure for American Express®️ Business Line of Credit™️: All businesses are unique and are subject to approval and review.