Startup Business Loans for Bad Credit or No Collateral
You can get a startup business loan with bad credit or no collateral — but you should compare costs and evaluate risks carefully.
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Updated · 5 min read
Written by
Senior Writer & Content Strategist 
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Managing Editor Key takeaways
- You can still get a startup business loan with bad credit or no collateral. However, your options may be limited to online lenders, CDFIs or microlenders that often charge higher rates.
- Avoid lenders that guarantee approval or lack transparency. They may be predatory or charge excessive fees.
- You can improve your chances of approval and secure better loan terms by strengthening your credit, offering collateral (if possible) or adding a cosigner.
Getting a startup business loan when you have bad credit or no collateral isn’t easy, but it’s possible — especially through online or nonbank lenders. Because these small-business loans come with higher rates, you should take the time to understand the terms and make sure you can afford the debt before borrowing.
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Understanding bad credit and no collateral
What does bad credit mean?
There’s no universal definition of bad credit.
FICO, the most commonly used credit scoring model, labels scores below 580 as “poor,” and scores between 580 to 669 as “fair.”
But, credit score requirements vary by lender and loan type. On this page, you’ll find lenders with minimum credit score requirements ranging from 500 to 625.
Factors that influence your credit score include:
- Payment history.
- Credit utilization.
- Length of credit history.
- Mix of account types (loans, credit cards, etc.)
- Recent applications.
- Delinquencies.
- Poor payment history.
What does no collateral mean?
Collateral is an asset, such as real estate, equipment or inventory, that you pledge to secure a loan. If a loan doesn’t have collateral, it’s considered unsecured — in other words, a no-collateral loan.
Most unsecured loans, however, still require a personal guarantee or a general lien on your business assets. These agreements help the lender ensure repayment, even without specific collateral.
A personal guarantee makes you personally responsible for the debt and a lien gives the lender the right to claim your business assets in the event of default.
Where to get startup business loans for bad credit or no collateral
Banks and other traditional lenders typically turn down startups that have bad credit or no collateral, since both factors make the business riskier to lend to. Alternative lenders, however, are often more flexible. Here are options to consider:
| Lender options | Best for | Key drawbacks |
|---|---|---|
| Startups with revenue that need fast funding. | High APRs, may require personal guarantee or lien on your business. | |
| Startups in underserved communities or those denied traditional loans. | Slow approval process, options may be limited by your location. | |
| Startups that need less than $50,000 or those with limited credit history. | Slow approval process, options may be limited by your location. | |
| Startups with consistent credit/debit card sales that need fast funding. | Extremely high APRs, frequent repayments. |
Online lenders
Best for: Startups that already have revenue; quick access to funds.
Online lenders may offer startup business loans to newer companies or owners who have lower credit scores. In exchange for this flexibility, they usually charge higher annual percentage rates (APRs) and may require a personal guarantee or general lien on your business assets.
To qualify, your startup will need:
- At least three months in business.
- Steady income (for example, Fundbox requires $2,500 in monthly revenue).
- A minimum credit score of 500+.
Online lenders often offer short-term loans, business lines of credit, equipment financing and invoice factoring — all options that can work even if you don’t have collateral.
» MORE: Can you get a startup business loan if your company has no revenue?
CDFIs
Best for: Startups in underserved communities; borrowers who can’t qualify for traditional loans.
Community development financial institutions, or CDFIs, receive funding to help support small businesses that lack access to conventional financing. Many CDFIs offer loans to startups without requiring traditional collateral.
If you can qualify, these lenders may offer more affordable rates and personalized guidance compared with online lenders. Approvals can take time, however, so you’ll need to be able to wait for funding.
You can find a full list of CDFIs in your state by visiting the CDFI Fund website.
Microlenders
Best for: Startups that need smaller loan amounts; borrowers with a limited credit history.
Microlenders specialize in helping small, early-stage businesses — especially those with low credit and limited assets. 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. This program strives to help women, low-income, veteran and minority entrepreneurs — as well as startups and microbusinesses. SBA microloans typically offer competitive interest rates and terms up to seven years.
Merchant cash advance companies
Best for: Startups with consistent debit and credit card sales that need fast funding.
Merchant cash advance (MCA) companies offer money upfront that you repay with a percentage of your debit and credit card sales. You may also be able to get an MCA directly from your payment processor, like PayPal or Shopify.
MCAs are generally easier to qualify for than typical business loans. Many merchant cash advance companies have low credit score requirements, don’t require collateral and prioritize your sales history when reviewing your application. As a result, MCAs may be a convenient option for startup businesses with consistent revenue, but lower credit scores.
Keep in mind, however, that these products can significantly cut into your cash flow. They also have high costs (APRs can reach up to 350% in some cases) — so you'll want to consider all other options before an MCA.
Best startup business loans for bad credit and no collateral
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| Product | Max loan amount | Min. credit score | |
|---|---|---|---|
 Expansion Capital Group - Merchant cash advance with Fundera by NerdWallet | $300,000 | 500 | with Fundera by NerdWallet |
 AltLINE - Invoice factoring Nerdwallet Rating with Fundera by NerdWallet | $5,000,000 | 300 | with Fundera by NerdWallet |
 Giggle Finance - Merchant cash advance with Fundera by NerdWallet | $15,000 | 300 | with Fundera by NerdWallet |
 Fora Financial - Online term loan Nerdwallet Rating with Fundera by NerdWallet | $1,500,000 | 570 | with Fundera by NerdWallet |
 OnDeck - Online term loan Nerdwallet Rating with Fundera by NerdWallet | $400,000 | 625 | with Fundera by NerdWallet |
 Accion Opportunity Fund Small Business Working Capital Loan Nerdwallet Rating with Fundera by NerdWallet | $250,000 | 620 | with Fundera by NerdWallet |
 Fundbox - Line of credit Nerdwallet Rating with Fundera by NerdWallet | $250,000 | 600 | with Fundera by NerdWallet |
 National Funding - Equipment financing Nerdwallet Rating with Fundera by NerdWallet | $150,000 | 600 | with Fundera by NerdWallet |
 Kiva U.S. - Microloan | $15,000 | 300 |
Nerdy Perspective
"Predatory lenders are an unfortunate reality —and they tend to target borrowers who are having trouble qualifying for financing. Be cautious of lenders that guarantee approval, offer 'no credit check business loans,' charge upfront fees or aren't transparent about their rates and terms.
At best, those may be expensive products. At worst, they could identify predatory lenders that can hurt your new company instead of helping it."
At best, those may be expensive products. At worst, they could identify predatory lenders that can hurt your new company instead of helping it."
senior writer, small business
How to get a startup business loan with bad credit
Lenders tend to be cautious about working with startups or borrowers who have bad credit. Before applying for a loan, therefore, you'll want to strengthen your business profile to increase your chances of approval. You can:
Build your credit
Improving your credit — both business and personal — can expand your loan options and help you access better rates and terms.
To build your personal credit, you can fix mistakes on your credit report and pay down debt. To build your business credit, you can establish trade credit with your suppliers and upload financial statements to the commercial credit bureaus.
Some lenders may also offer business loans or lines of credit (secured by cash deposits) that you can use to establish positive payment histories.
Add a cosigner
Having a cosigner on your business loan — someone who agrees to take over payments on the loan if you default — can make your application more favorable to a lender. Valuable cosigners usually have strong credit and personal finances.
Include a well-written business plan
A thorough business plan can help convince a lender that you're worth investing in. Your business plan should outline your financial goals and how you plan to achieve them. It should also include how much funding you need and show your ability to repay it.
To help you write a business plan, you can take advantage of the free services offered by the SBA and resources like your local Small Business Development Center and SCORE.
Alternative financing options for startups with bad credit
If you’re not sure that you can qualify for a traditional loan — or just want to explore all of your options — consider these alternatives:
- Business credit cards. If your credit score is in the low 600s or higher, you may be able to qualify for a business credit card. You can apply for a business credit card as a true startup — before you’ve generated any revenue at all. Card issuers may give more weight to your personal finances in those cases, however.
- Small-business grants. Grants provide financing that you don’t have to repay, although applications may be competitive and time-consuming. Nevertheless, business grants can be a good option if you’re a startup with consistent early revenue, but are facing credit challenges. To qualify, you’ll want to show the grant issuer that your business idea has staying power.
- Friends and family loans. Borrowing money from family and friends may be a low-cost funding option if you can’t get a traditional loan. The terms of the loan can be flexible because you have the ability to work them out with your family member or friend. Make sure, however, you have a written agreement with loan details to avoid misunderstandings down the road. Friends or family lending you money will also want to consider any IRS guidelines that may apply.
- Crowdfunding. With crowdfunding, donors receive a product or service related to your business in exchange for their contribution. This is a particularly good option if you have a strong internet presence or following. It can also be a worthwhile choice if you're still preparing to launch your business idea.
Frequently asked questions
Can you get a guaranteed startup business loan with bad credit?
Certain lenders may promise “guaranteed” startup or bad credit business loans, but you should approach these claims with caution. Credible business lenders are unlikely to promote guaranteed approval and instead will evaluate your loan application (likely using both your time in business and credit score) before making a decision.
Can you get a startup business loan with a 500 credit score?
Yes. While you probably can’t get a bank or SBA loan with a credit score of 500, some online and alternative lenders are willing to work with borrowers who have lower credit scores and less than one year in business. Keep in mind, however, that these loan products typically have high interest rates.
Do you need collateral to get a startup business loan with bad credit?
You likely won’t need to put up physical collateral (like real estate) to qualify for a startup business loan from an online lender that works with bad-credit borrowers. But online lenders may file a blanket lien against your business or require a personal guarantee. This means your business or personal assets could still be at risk if the loan is not repaid.
