Can You Get a Business Loan With Bad Credit?

How lenders view a low score

Low credit signals risk, so funders either decline, ask for more security, or raise the price. Strong revenue can offset part of it.

Banks and SBA lenders usually set firm score thresholds. Many alternative funders put more weight on cash flow: how much comes into your business bank account each month and how steady it is. Time in business and industry also matter.

A score alone rarely tells the whole story. Recent late payments, a bankruptcy or collections affect different decisions differently. Read credit requirements for a business loan and why credit scores matter.

Options that consider more than your score

Revenue-based financing, working capital, equipment financing secured by the asset, and some lines of credit can work at lower scores.

• Working capital and revenue-based financing. Based largely on monthly deposits.
• Equipment financing. The equipment secures the deal, which can help.
• Smaller lines of credit. Lower limits with tighter review.

ROI Funder considers 500+ FICO, 6+ months in business and $20,000+ monthly revenue. See business line of credit with bad credit and equipment financing with bad credit.

What it costs, and how to stay safe

Expect higher costs and shorter terms. Make sure payments fit comfortably in your cash flow, even in a slower month.

Illustrative example: $30,000 at a factor rate of 1.4 means $42,000 repaid. If repayment runs over seven months, payments average $6,000 a month. Ask whether a slow month could break that budget. Run the numbers with our stress test.

Watch for stacking several advances at once, which can create a payment load that revenue cannot support. Read about loan stacking before you take a second offer.

Steps that improve your odds

Clean up bank activity, pay down balances, fix errors on credit reports, and apply for an amount your revenue can support.

1. Pull your credit reports and dispute errors.
2. Avoid overdrafts and negative balances for at least a few months before applying.
3. Pay down credit card balances to lower utilization.
4. Keep business and personal funds separate.
5. Request a realistic amount tied to a specific use.

Our seven ways to boost your credit score gives more detail. Small improvements can change the offers you see.

Beware of the wrong kind of offers

Be careful with upfront fees, pressure to sign quickly and anyone who will not show the total repayment amount in dollars.

Legitimate funders show the amount you receive, the amount you repay, the payment schedule and all fees in the contract. If you cannot find those four figures, do not sign. Also be skeptical of promises made before reviewing your bank statements.

Read the contract for personal guarantees, liens, default terms and prepayment rules. See what happens if you default on a business loan.

Check your options with a soft pull

You can apply with ROI Funder and see offers without hurting your score. There is no obligation to accept.

Applying takes a few minutes online with a soft credit pull. ROI Funder matches your file to the funders in its network that fit and shows true cost, payback period and monthly-equivalent payments before you decide. Approved, complete files (the application plus 3 months of business bank statements) can fund the same business day.

Start with working capital or revenue-based financing, and only borrow if the payback math is clear.

Finally, keep a record of every offer you receive, including the amount funded, total repayment and payment schedule. Putting offers side by side makes it obvious which one is least costly, and it protects you from deciding under time pressure.