Bad Credit Business Loans

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Introduction to Bad Credit Business Loans

Contrary to popular opinion, a low credit score does not necessarily indicate irresponsibility. Some small business owners who work hard have bad credit because of circumstances beyond their control. In the early days of a company, it’s common for business owners to borrow money from their personal accounts to maintain the business. Once your score is severely damaged it can take a very long time to rebuild it. Companies like Blue Tree Financing offer bad credit business loans to small businesses.

Business loans for bad credit history are structured differently than traditional business loans. They allow small business owners to make loan payments without putting too much pressure on their cash flow. 

What are Bad Credit Business Loans?

Small business owners with credit scores below 600 can apply for bad credit business loans. These loans are intended to provide a business owner with enough cash to run their business, pay off debts or cover short-term costs. Small business loans for people with bad credit histories usually have terms of no more than 18 months, and a higher interest rate compared to alternative loan options. The loan amount, and repayment schedule are selected specifically to make it easy for small businesses with bad credit to repay. The small business owner can quickly meet the requirements for another business loan, and in the process raise his or her business and personal credit scores.

You can read the guide to find out what options are available for small business owners who have poor credit. Also, you will learn what to look for when shopping around for loan approval. You will then have all the information needed to make an informed decision about small business loans with bad credit.

How do Business Loans for Bad Credit Work?

Here are the best business loans for people with bad credit:

You can see that the only Small Business Administration loans not listed are business term loans and small business administration loans . Business term loans are no longer the traditional long-term loan with high borrowing amounts, low rates of interest, and a long repayment period. They become a shorter-term loan, or a product similar to invoice funding, which allows you to get paid up front on unpaid invoices, and merchant cash advance. The SBA and term loan are the best loans for small businesses. They have the lowest rates and are available only to business owners who have high credit scores.

The small businesses loan options listed on this list are all repaid very quickly, and they provide funding that is modest at best. Small business owners have the option to choose alternative lenders or financing options, rather than being locked into fixed monthly payments. Even short-term loans for business can be paid back weekly, biweekly or monthly.

Cash flow and sales volume are more important than credit scores for some bad credit small businesses loans. Your loan amount for a merchant cash advance will be based on your monthly debit and card sales. Invoice financing and accounts receivable factors are largely unaffected by your personal credit score. Revenue based business loans are similar to merchant cash advances in that they require a personal credit score. However, the amount of your loan is determined by your monthly sales and not just on credit cards or debit transactions.

There are business lines of credit available for people with bad credit. The terms will not be as good as those of a local small business line of credit. If revolving credit lines are the best option for small business owners, they can have them.

Business equipment financing has the same repayment structure of a term loan. However, the equipment desired is used as securing. It reduces the risk of a bad credit score and a poor personal credit history.

Research, Facts & Reports on Bad Credit Business Loans

In 2018, 54% of applicants who had a high or medium-risk credit score applied to online lenders, compared with just 41% to small banks. Source: Small Business Credit Survey

The 2019 Small Business Credit Survey shows that 57% of small business owners are seeking funding less than $25K Source

Most traditional lenders will approve you if your credit score is at least 650. Most traditional lenders prefer that a personal credit score minimum of 680 is obtained before they approve business credit lines and loans. Source: Experian

What are the Advantages of Business Loans with Bad Credit?

Accessibility is the main advantage of small-business loans for people with bad credit. As long as you have a stable cash flow, a bad credit score will not prevent you from getting approved. Strong sales can also reduce the impact of a poor personal credit score on a small business loan.

Borrowers with bad credit can use the money to pay existing debts. This is one of the most common causes of poor credit. Many traditional lenders do not allow borrowers to use the funds for this reason or approve borrowers who have too much debt.

A track record of timely payment is another advantage. Not every small business loan for bad credit will affect your credit score. You will qualify for more funding after you have proven that you can repay a small-business loan on time. The terms and interest rates are likely to be better.

You might consider this small business loan/ credit line to be your first step in obtaining the funding you need to achieve your goals. Even if you have less-than-perfect credit, your goals can still be achieved. You’ll just have to wait longer to achieve your goals.

What are the Disadvantages of Business Loans with Poor Credit?

Business loans for bad credit are expensive and don’t offer the largest loan amounts. These characteristics are a natural consequence of having bad credit. Alternative lenders use lower borrowing amounts and higher rates to compensate for the increased repayment risk.

You can also choose the wrong product or repayment schedule for your small business loan. Bad credit business loans should have a simple repayment schedule. Cash flow cycles are different for every business. What’s easy for one business to repay could be a financial burden for another. If you choose the wrong product for your small business, high interest rates and payment terms (e.g., daily or weekly) can do more harm than benefit to your cash flow. When you run out of business financing options, you may make a quick (and probably incorrect) decision.

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How to Apply for Bad Credit Business Loans

The approval speed depends on both the product being approved and the financial stability of the business. Some products are approved within 24 hours while others may take up to a week. How to apply:

Your Business Loan Gets Set up – Now What?

Business loans for people with bad credit are not just a means to finance your business. This is a great way to build (or improve) your business and personal credit score.

No matter what type of loan you receive, be sure to pay all of your loan obligations on time and fully. Keep your credit balance under the credit limit if you have a business line of credit.

Your business credit score will be positively impacted if you consistently make your payments on time. This will allow you to get better rates and terms the next time you need business funding.

What if I am Declined for a Bad Credit Business Loan?

The lender may decide that a business loan approval would be detrimental to your cash flow after assessing the financial health of your business. We may recommend a different tool to finance your business. For example, a business loan or a credit card. Personal loans and business credit cards are easier to qualify than business loan options. You may not receive the credit limit that you require right away, but business credit cards can be used to improve your credit score. Regular use of business credit cards and regular payments will help you build your credit score.

Also, credit unions can be a great option. Credit unions are not always helpful, but it is worth trying to see what offers they have.

Consider these services to repair your credit before you apply. We can identify the problems that are affecting your credit score and help you find practical solutions to eliminate them. Moreover, if you improve your credit score prior to applying for a business loan, you will be able to qualify for more options and receive better loan offers.

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Current monthly sales deposit average to your business bank account?
How much Working Capital would you like for your business?