Can You Get a Business Loan with Bad Credit?

Let’s cut right to the chase: you made some financial mistakes in the past. Maybe it was a medical emergency that wiped out your savings, a divorce that decimated your credit, or simply being young and inexperienced with credit cards.

Now you’re running a successful business, but that three-digit credit score is haunting you like a chronic problem that just won’t go away.

Here’s the good news: Yes, you absolutely can get a business loan with bad credit. Here’s the even better news: it’s happening more often than you might think, and the options are getting better every year.

But—and there’s always a but—it’s not going to be as straightforward as walking into your local bank and charming the loan officer with your winning smile and solid business plan.

Here’s what you do…

What Do They Mean By “Bad Credit” Really?

Before we go any further, let’s get our definitions straight. Credit scores range from 300 to 850, and here’s how lenders typically view them:

Excellent: 750+
Good: 700-749
Fair: 650-699
Poor: 600-649
Bad: Below 600

If you’re sitting below 600, you’re officially in “bad credit” territory. But here’s where it gets interesting. Some online lenders and nonprofit organizations offer business loans for bad credit and will accept a minimum personal credit score as low as 500. That means even if your credit score looks like a really bad semester GPA, you still have options.

The Reality Check: Why Bad Credit Makes Things Harder

Let’s be real about what you’re up against. Over a third of small businesses were denied at least some of the funding they requested because of their credit score.

Traditional banks are particularly tough on credit scores. They typically want to see scores of 675 or higher for most business loans, and many won’t even consider applications below 640. This is why alternative lenders had the highest loan approval rates, accepting over 28% of small business loan applications compared to much lower approval rates at traditional banks.

But here’s the thing that many business owners don’t realize: Your personal credit score is just one piece of the puzzle. Smart lenders are increasingly looking at the bigger picture.

Your Business Performance Can Override Your Credit Score

While your personal credit history tells the story of your past, your business performance tells the story of your future earning potential. And forward-thinking lenders are paying attention.

Let me tell you about M, who owns a thriving food truck business in Austin. His personal credit score was sitting at 580 after a bankruptcy three years earlier, but his food truck was pulling in $15,000 a month in revenue with consistent growth. When he needed $50,000 to buy a second truck, traditional banks laughed him out of the building.

However, we got some of our alternative lending partners to look at his business bank statements and cash flows, with the result that he got approved within 48 hours.

This isn’t unusual anymore. At QualiFi, we’re getting many lenders to focus on our clients’ strengths and real business performance metrics as opposed to relying only on credit scores.

Need to infuse more capital into your business? Refused by multiple lenders?

Don’t sweat it. We can help.

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Your Loan Options with Bad Credit

Just because you have bad credit doesn’t mean you’re stuck with no choices. You have several legitimate options, each with their own pros and cons:

Revenue-Based Financing

This is where lenders look at your monthly revenue instead of your credit score. If you can show consistent business income, many lenders will work with credit scores as low as 500-550. You repay the loan as a percentage of your monthly revenue, so payments automatically adjust with your business performance.

Best for: Businesses with steady cash flow but poor personal credit

Merchant Cash Advances

If your business processes a lot of credit card transactions, merchant cash advance providers will give you an upfront sum in exchange for a percentage of your future credit card sales. You’ll have a shot at securing a short-term loan from an alternative lender with a minimum credit score of 600, but some MCA providers will work with scores as low as 500.

Best for: Retail businesses, restaurants, and service providers with high credit card volume

Equipment Financing

When the equipment serves as collateral, lenders are more willing to overlook credit issues. Business term loans generally require a credit score of around 650, but equipment financing often has lower requirements because of the collateral involved.

Best for: Any business needing machinery, vehicles, or technology where the equipment can serve as security.

Asset-Based Lending

If you have valuable business assets like inventory, receivables, or real estate, you can get an asset-based loan against the value of these assets rather than focusing heavily on credit scores.

Best for: Manufacturing, wholesale, or businesses with significant physical assets

SBA Microloans

These smaller loans (up to $50,000) through SBA-approved community lenders often have more flexible credit requirements. On average, the credit score requirement for an SBA loan is 620 to 640, but microloans can sometimes go lower.

Best for: Smaller funding needs, startups, or businesses in underserved communities

Did you know there’s a dozen different types of loans available for small businesses?

EXPLORE YOUR OPTIONS

The Cost of Bad Credit: What You Need to Know

Let’s talk numbers because this is where bad credit really hits your wallet. Business loan rates for bad credit can range from 10% to 50%, depending on the lender and type of loan. To put that in perspective, the average interest rate for new small business term loans in Q4 2024 was 7.3% for fixed-rate loans.

That’s a significant difference. However, before you get discouraged, consider this: if a loan allows you to grow your business, increase revenue, or take advantage of a major opportunity, the higher interest rate might be worth it. The key is running the numbers and making sure the loan will generate more profit than it costs.

When Do Bad Credit Loans Make Strategic Sense?

Bad credit business loans aren’t always the right answer. They make the most sense when:

You have a clear ROI plan. Can you demonstrate how the loan will generate enough additional revenue to justify the higher interest costs?

Time is critical. Sometimes paying higher interest rates is worth it to seize a time-sensitive opportunity.

You’re building credit. If this loan helps establish or rebuild your credit profile, the long-term benefits might outweigh short-term costs.

Traditional options aren’t available. If banks have consistently rejected you, approaching a company like QualiFi and checking out alternative lenders might be your best path forward.

Strategies to Improve Your Chances

Getting approved with bad credit isn’t just about finding the right lender—it’s about presenting your application in the strongest possible light. Here are the strategies that actually work:

Lead with Your Business Story

Your credit report tells one story, but your business performance tells another. At QualiFi, we work towards creating a compelling narrative that shows:

Consistent or growing monthly revenue
Strong cash flow patterns
Clear plans for loan proceeds
Industry experience and expertise

Gather Strong Financial Documentation

Bad credit means you need to work harder to prove your business’s stability. Get to work on the following documents:

12-24 months of business bank statements
Profit and loss statements
Tax returns for both personal and business
Accounts receivable aging reports
Contracts or letters of intent from major customers

Consider a Co-Signer or Collateral

A co-signer with good credit can dramatically improve your approval odds and terms. Similarly, offering collateral reduces the lender’s risk and often results in better rates.

Start Small and Build Lender Relationships

If you’re getting rejected for larger amounts, consider starting with a smaller loan to establish a track record with a lender. Many lenders offer increasing credit lines as you prove your ability to repay.

Watch Out for Predatory Lending Practices

The bad credit lending space has some legitimate players, but it also attracts predators. Here are some obvious and not-so-obvious red flags:

Upfront fees: Legitimate lenders might charge application fees, but they don’t typically require large upfront payments before approving your loan.

Guaranteed approval: No legitimate lender guarantees approval without reviewing your application.

Pressure tactics: Be wary of lenders who pressure you to sign immediately or claim the offer expires in hours.

Unrealistic terms: If the deal sounds too good to be true, it probably is.

Your Credit Score Isn’t Your Business Story

Your credit score represents a historical financial snapshot, not a prediction of your business’s future success. Some of the most successful entrepreneurs we know had terrible credit when they started out, but they just didn’t let that stop them from pursuing their goals.

Securing business loans with credit scores around 600 is increasingly common as lenders recognize that business performance often outweighs personal credit history in predicting repayment success. The key is knowing where to look, how to present your case, and what terms are reasonable given your situation.

Stop jumping over dozens of hurdles that your bank throws at you.

We can get you funding within days rather than weeks, with minimal documentation.

TELL US HOW MUCH YOU WANT!

Can You Get a Business Loan with Bad Credit?

What Do They Mean By “Bad Credit” Really?

The Reality Check: Why Bad Credit Makes Things Harder

Your Business Performance Can Override Your Credit Score