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Best Business Loans for Startups With Bad Credit in 2022

Startup business loans are available if you have bad credit, but shop carefully to keep costs in line.
Written by Ryan Lane, Randa Kriss
Edited by Sally Lauckner
Last updated on July 8, 2022

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Online lenders can offer startup business loans for bad credit, but they may be expensive. You should make sure your new business can handle the potential costs of any debt before taking it on.
To overcome poor credit and get funding, startups will typically need at least six months in operation and a track record of business success — even if it’s over a short period of time. Reputable lenders won’t offer guaranteed approval.
Below, compare some of the best startup business loans for bad credit — defined by FICO as a score from 300 to 629. Plus, learn more about alternatives if you can’t qualify for a small-business loan until your company grows.

How much do you need?

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We’ll start with a brief questionnaire to better understand the unique needs of your business.

Once we uncover your personalized matches, our team will consult you on the process moving forward.

Here are 4 startup business loans bad credit

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Fora Financial - Online term loan

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Best for Short-term business loan for startups with bad credit$750,000550

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Fundbox - Line of credit

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Best for Business lines of credit for startups with bad credit$150,000600

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Bluevine - Line of credit

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Best for Business lines of credit for startups with bad credit$250,000625

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SBA Microloan

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Best for Microloans for startups with bad credit$50,000620

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Our pick for

Short-term business loan for startups with bad credit

A short-term business loan can be a good option for immediate financing needs and specific, one-time purchases.

Fora Financial - Online term loan

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Max Loan Amount
$750,000
Min. credit score
550
Fora Financial can be a good fit for borrowers who may fall short of qualifying for traditional bank financing, or young but established small businesses looking for speedy financing.

Our picks for

Business lines of credit for startups with bad credit

Business lines of credit are well-suited for managing cash flow and covering emergencies. Lines of credit are more flexible than business term loans.

Fundbox - Line of credit

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Max Loan Amount
$150,000
Min. credit score
600
Est. APR
10.10-79.80%
Fundbox offers a business line of credit to fill a cash-flow gap, and qualifying is easier than with other lenders.
May fund quickly

Bluevine - Line of credit

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Max Loan Amount
$250,000
Min. credit score
625
Est. APR
15.00-78.00%
Bluevine's line of credit provides fast working capital for short-term borrowing needs.
May fund quickly

Our pick for

Microloans for startups with bad credit

Microlenders and nonprofit organizations can offer loans of up to $50,000 and may be willing to work with new businesses with bad credit. In fiscal year 2021, startups received 36.9% of the SBA microloans issued.

SBA Microloan

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Max Loan Amount
$50,000
Min. credit score
620
Est. APR
8.00-13.00%
The average microloan is roughly $13,000, according to the Small Business Administration.

How Much Do You Need?

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What is a bad credit score?

A bad credit score typically ranges from 300 to 629, according to FICO and VantageScore, the most common scoring models. Scores of 630 to 689 are considered fair credit.
Although small-business lenders may have their own criteria to define bad credit, bad-credit business loans usually target borrowers with FICO scores below 630.

Where to get a startup business loan with bad credit

Banks and other traditional lenders often won’t lend to startups, especially those with bad credit, because these businesses don’t have an established financial history to prove they can repay their debts.
It is possible to get a startup business loan with bad credit, but options will be limited — and potentially costly. Here are some choices to consider.

Online lenders

Online lenders may offer startup business loans to companies less than a year old or those whose owners have lower credit scores. These lenders may offer different types of business loans, such as short-term loans, business lines of credit and invoice financing.
Some online lenders also offer merchant cash advances, where you receive a lump sum of capital and repay it with a percentage of your credit card sales. However, because of their effect on cash flow and high costs (APRs can reach 350%), you’ll want to consider all other options before turning to an MCA.
Generally, startup business loans for bad credit will have higher annual percentage rates than other types of funding (possibly as high as 99%), as your financial profile is riskier for lenders. Your startup will also need to be generating income already. For example, business lines of credit from Bluevine require at least $10,000 in monthly revenue to qualify.

Community development financial institutions

Community development financial institutions, or CDFIs, receive funding to help underserved communities. Startups that lack resources, opportunity or financial access may be able to get a business loan from a CDFI, even with bad credit.
Because CDFIs are typically banks and credit unions, they may offer competitive rates if you can qualify. However, approvals can take time, so your business will need to be able to wait for funding.
You can find a full list of community development institutions in your state on the CDFI Fund website.

Microlenders

Similar to CDFIs, microlenders often focus on providing capital to traditionally underserved individuals, such as minority business owners, who may be underbanked and have insufficient credit. If you qualify, a microloan can be a good choice for bad-credit startups with small funding gaps. Loans are usually $50,000 or less.
Some microlenders also issue loans through the SBA microloan program, which is specifically designed to help women, low-income, veteran and minority entrepreneurs, as well as startups and microbusinesses. Although rates and terms can vary based on the microlender, the program typically offers competitive interest rates and terms up to seven years.

How to get startup business loans with bad credit

Evaluate your business’s credentials

In order to determine what type of business loan you can qualify for, you should check your personal credit score as well as pull your company’s financial documents, such as bank statements and balance sheets.
Although requirements vary by lender, you’ll typically want to have a minimum credit score of 600, at least six months in operation and strong finances to qualify for a startup business loan.

Research and compare lenders

Generally, online lenders will offer the most options for startup business loans for bad credit. You may also find CDFIs or microlenders that are willing to work with your business. You’ll want to make sure that you understand the lender’s product offering and eligibility requirements before applying.
Be wary of any lender that advertises guaranteed approval or startup loans with no credit check. At best, those may be expensive products. At worst, they could signal predatory lenders that will potentially hurt your new company more than help it.

Submit your application

Depending on your lender, you’ll submit your business loan application online, over the phone or in person. Lenders will typically consider your personal credit score, financial history and time in business as part of the underwriting process and will also ask you to provide:
  • Business and personal bank statements.
  • Business and personal tax returns.
  • Business financial statements, such as a profit and loss statement or a balance sheet.
You may also be required to sign a personal guarantee. Although you may not need to provide physical collateral to secure your loan, doing so will likely help you access more competitive interest rates and repayment terms.
Some online lenders can issue financing within 24 hours, whereas other lenders may take longer to approve and fund loans. Before signing a business loan agreement, you should compare any and all loan offers you receive to make sure you’re getting the best deal for your company.

Improve your credit

Improving your credit can help expand your financing options (e.g., SBA loans, bank loans) and access better rates and terms as your company grows. Ways to build credit include paying down debt and fixing mistakes in your credit report.
Startups can also look to build business credit through actions like updating business information and uploading financial statements to business credit bureaus.

Alternatives for bad-credit borrowers

Startups with bad credit may have more difficulty getting traditional business loans. If you’re looking for an alternative small-business financing option, here are some to consider:
  • Personal business loans. If your startup isn’t eligible for any form of financing, you could consider a personal loan. These loans are credit-dependent, but options are available for borrowers with bad credit.
  • Business credit cards. If your credit is at the high end of what’s considered a bad score (below 630), you may be able to qualify for a business credit card.
  • Small business grants. Instead of debt-based financing, you might apply for small-business grants that you don’t have to repay. Applying for grants can be competitive and time-consuming, but the payoff can be worth it if you secure one. Plus, there are options designed specifically for startup businesses.
  • Selling equity. Another alternative to debt financing, you could sell equity — or shares of your business — to investors, friends or family. This is typically a good option for tech businesses and fast-growing startups, but other businesses might use an equity crowdfunding platform to reach their funding goal.
  • Crowdfunding. If you don’t want to sell equity, you might try raising funds with another type of crowdfunding — where donors receive a product or service related to your business in exchange for their contribution.

Compare more small-business loan options

The best business loan is generally the one with the lowest rates and most ideal terms. But other factors — like time to fund and your business’s qualifications — can help determine which option you should choose. NerdWallet recommends comparing small-business loans to find the right fit for your business.
Last updated on July 8, 2022

To recap our selections...

Best Business Loans for Startups With Bad Credit in 2022

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