Low credit can make it hard to get a business loan from a traditional bank, but some online lenders offer alternative business loans for bad credit. These lenders look beyond your credit score and consider other factors, such as how long you’ve been in business and your annual revenue, when gauging your creditworthiness.
Regardless of your credit score, you still want to shop around for low interest rates and flexible repayment terms before committing to a bad credit business loan. But don’t despair: Just because your personal credit score is less than stellar doesn’t mean your business has to suffer.
The Simple Dollar’s Picks for Best Business Loans for Bad Credit
- Best for New Businesses: OnDeck
- Best for Businesses with Great Online Reviews: Funding Circle
- Best for Established Businesses: Fundation
- Best for Seasonal Businesses: Dealstruck
- Best for Businesses with Daily Credit Card Receipts: Capify
- Best for Businesses with Outstanding Invoices: BlueVine
The right lender for you will depend on your business and what kind of financing you need — whether it’s a basic term loan, a line of credit, or an advance on outstanding invoices. Keep reading to find out more about our top picks.
Best for New Businesses: OnDeck
Who it’s good for: OnDeck is a good option for business owners who don’t have great credit, but have the means to repay a loan quickly.
OnDeck offers fixed term loans with daily or weekly repayment options. Maybe you know your business will make money over the next few months, but you need to make a purchase now. You could borrow $10,000 to spend on equipment, for example, and make fixed daily payments over three months.
Even though they have pretty easy-to-meet minimum requirements, the majority of OnDeck customers have a credit score of over 660, have been in business for seven years, and have revenues that exceed $450,000.
And while OnDeck works with borrowers in more than 700 industries, certain business aren’t eligible for loans, including drug dispensaries, firearms vendors, and fortune tellers.
Best for Businesses with Great Online Reviews: Funding Circle
Who it’s good for: Businesses with good cash flow and glowing customer reviews that are looking to purchase inventory or hire staff.
Funding Circle is a peer-to-peer lender that takes into account a number of factors when determining your interest rate and origination fee — from your business’s cash flow to online customer reviews. After filling out a quick, initial application, Funding Circle assigns you an account manager and personal underwriter to help with the loan process and get a better understanding of your business.
Like OnDeck, Funding Circle does not lend to certain industries, including nonprofit organizations, gambling businesses, and marijuana dispensaries.
Best for Established Businesses: Fundation
Who it’s good for: Businesses (with at least a handful of employees) looking for convenient financing to purchase the inventory they need.
Fundation offers conventional term loans to more established businesses for the purposes of “expansion, equipment, and capital improvement.” They also use only their own capital which is different from several other lenders. Your individual fee is based on several factors that fall into the categories of business stability, credit history, cash credit and debt, and financial metrics. They also don’t have prepayment penalties, so if you suddenly have the extra cash to pay off the remaining balance, you won’t be hit up with additional fees.
Best for Seasonal Businesses: Dealstruck
Who it’s good for: Seasonal businesses that need to purchase inventory.
Dealstruck’s Inventory Line of Credit allows businesses to purchase inventory when prices are good, even if they don’t have the cash on hand. With a revolving credit line and interest-free period, businesses — especially retailers — can plan for upcoming seasons without emptying their pockets. Dealstruck also offers term loans and account receivable lines of credit.
Best for Businesses with Daily Credit Card Receipts: Capify
Who it’s good for: Businesses, like boutiques or restaurants, that do a high volume of credit card sales on a daily basis.
Capify offers a merchant cash advance with flexible repayment as an alternative to a small business loan. This option may be more attractive than a term loan or invoice financing; you can pay the advance back from your daily receipts and the amount you pay can go up or down based on your sales.
Best for Businesses with Outstanding Invoices: BlueVine
Who it’s good for: Businesses that need to fill temporary cash flow gaps and don’t have any inventory to borrow against.
BlueVine Invoice Factoring is designed for B2B businesses that need money now and can’t wait for their customers to pay outstanding invoices over $500. The application takes minutes to complete, and you may be approved within 24 hours, with BlueVine paying 85% to 90% of the money upfront. When the invoice is due, customers will send payment to your BlueVine account (instead of your business account).
BlueVine only accepts invoices that meet specific criteria, including whether or not the service was completed, the value (must be greater than $500), and the due date. Once you have an approved credit line, you have the flexibility to determine which invoices you want funded.
Bad Credit Business Loans at a Glance
|Lender||Product||Loan Amounts||Requirements||Rates and Fees||Repayment Terms|
|OnDeck||Term Loan||$5,000-$500,000||600+ credit score; $100,000 annual revenue; at least 1 year in business||9.99% starting APR for short term loans; 9% for long term loans; Rates start at 0.25% per week||3-36 months|
|Funding Circle||Term Loan||$25,000-$500,000||620 credit score, $150,000 annual revenue; at least 2 years in business||4.99% starting APR; varies based on term; origination fee ranges from 3.49% to 7.99%||6-60 months|
|Fundation||Term Loan||Up to $500,000||"Good" credit score, $100,000 annual revenue; at least two years in business; at least 3 employees||APRs range from 8.99%-29.99%, inclusive of origination and drawing fees||Up to 48 months|
|Dealstruck||Inventory Line of Credit||$5,000-$500,000||600 credit score, $150,000 annual revenue; at least one year in business||APRs range from 9.99%-$23.99, with 2.99%-5.99% origination fee||12-48 months|
|BlueVine||Invoice Factoring||$5,000-$5,000,000||530 credit score, $10,000 monthly revenue; at least 3 months in business; outstanding invoices||0.25% starting rate per week||Invoice payment term must be shorter than 13 weeks|
|Capify||Merchant Cash Advance||$5,000-$1,000,00||60+ days credit card processing history; at least $8,000 in monthly credit card sales||During the length of your payback period, a small percentage of your daily credit/debit card sales is withheld until the advance is paid in full.||Repayment is flexible and works alongside your natural cash flow.|
How We Picked the Best Bad Credit Business Loans
For this roundup of the best bad credit business loans, we took the following criteria into consideration:
- APR and fees: One trade-off of being able to get a small business loan when you have bad credit is that it often entails paying a higher interest rate or more in fees. The best lenders feature the most competitive rates and keep fees as low as possible.
- Repayment terms: Before you take on any loan, you need to understand how payments add up find a loan with terms that are suited towards your business structure.
- Minimum credit requirements: The best lenders understand that your credit score alone isn’t necessarily a measure of your business’s ability to repay a loan.
- Funding amount: Small business owners have different borrowing needs and the lenders featured here offer loans with wide ranges.
- Funding speed/convenience: Online lenders are appealing because their loan application and funding process is faster than traditional banks.
- Reputation: The online lending marketplace is fairly new, but the best lenders are the ones whose track records have proven them to be trustworthy.
The Bottom Line
Having bad credit doesn’t mean that a small business loan is out of your reach, so shop around and consider the alternatives. Also, it’s always a good idea to take your time and read the fine print. Even though you’re the one who needs money, if a lender is going to look closely at your financials and business background, it’s important for you to do just as much digging to make sure that you’ve made the right choice for your business.
Watch out for potential pitfalls.
Taking on a loan can help your business grow or stay afloat when cash is tight, but it’s not without certain risks. Before committing to a bad credit business loan, you want to consider:
- Cost: Borrowing money for your business when you have bad credit almost certainly means paying more in interest and fees than you would if you had good credit.
- Liability: Even when a lender isn’t asking for collateral, they may ask for a personal guarantee or a blanket lien as part of your business loan.
Want a better business loan? Boost your personal credit score.
If you’d rather go a more traditional lending route, or you can’t secure any sort of loan because of your bad credit, you need to work on building your personal credit score. Learn more about what’s considered a good credit score and how to build credit.