How Much Do You Need?
Our pick for
Startups with at least six months in business
Fundbox offers business lines of credit if your personal credit score is at least 600. You must also have two months of activity in Fundbox-supported accounting software or three months of transactions in a business bank account to qualify.
Fundbox - Line of credit
- Financing available within one business day after approval.
- Simple application with minimal documentation required.
- Startup-friendly—accepts borrowers with a minimum of six months in business.
- Low minimum credit score requirement.
- No prepayment penalties, account maintenance fees or inactivity fees.
- Rates are high compared to traditional banks.
- May require personal guarantee.
- Can’t be used to build business credit.
- Weekly repayments required over a short term (maximum of 24 weeks).
- Minimum credit score: 600.
- Minimum time in business: 6 months.
- Minimum annual revenue: $100,000.
How Much Do You Need?
Summary of Best Startup Business Loans for Bad Credit of January 2022
Can you get a startup business loan with bad credit?
- You likely won’t qualify for bank or government loans. These typically have the most favorable terms but come with strict minimum qualifications for credit scores and years in business. For example, you’ll likely need to be in business for at least a year to get a bank small-business loan, and loans backed by the U.S. Small Business Administration will require a good credit score (at least 690).
- Alternative loans are available, but they cost more. Online lenders may offer startup business loans to companies less than a year old or those whose owners have lower credit scores. But because of that risky lending profile, you’ll likely pay more — annual percentage rates can reach 99%. Your startup will also need to be generating income already. For example, invoice factoring from BlueVine requires at least $10,000 in monthly revenue to qualify.
- CDFIs may offer competitive rates — if you qualify. 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. But approvals can take time, so your company will need to be able to wait for funding.
- Microlenders may cover smaller amounts. Similar to CDFIs, microlenders focus on providing capital to disadvantaged 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.
Types of bad credit startup business loans
- Business lines of credit. These are a flexible way to fund your startup, allowing you to take out cash as needed up to a borrowing limit.
- Invoice factoring or financing. If you’re running a B2B company, you may be able to access unpaid customer invoices earlier by selling them to a third party (“factoring”) or borrowing against their value (“invoice financing”).
- 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.
- Merchant cash advances. Lenders provide a lump sum that you pay back daily or weekly. Because of their effect on cash flow and high costs (APRs can reach 350%), merchant cash advances should typically be a last resort.
Alternatives for bad credit borrowers
- Applying for small-business grants.
- Selling equity, or shares of your business, to investors, friends or family.
- Using a crowdfunding platform to raise money.
Compare more small-business loan options
To recap our selections...
Best Startup Business Loans for Bad Credit of January 2022
- Fundbox - Line of credit: Best for Startups with at least six months in business