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Best Business Loans for Startups With Bad Credit in 2024

By Randa Kriss, Olivia Chen
Last updated on February 28, 2024
Edited bySally Lauckner
Fact checked and reviewed

⏰ Estimated read time: 11 minutes

Startup business loans are available if you have bad credit, but you should shop carefully to keep costs in line.

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Online lenders may offer startup business loans for bad credit, but they can be expensive with higher interest rates and fees. You should make sure your new business can handle the potential costs of any debt before taking it on.
Online lenders usually won’t require you to put up collateral to overcome a low credit score and get funding. But startups will typically need at least six months in operation and a track record of generating revenue during that time. And reputable lenders won’t offer guaranteed approval.
Below, compare some of the best startup business loans for bad credit — a score of around 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 8 startup business loans for bad credit

LenderNerdWallet RatingMax loan amountMin. credit scoreNext steps

Fora Financial - Online term loan

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4.5/5

Best for Short-term business loans for startups with bad credit

$1,500,000500

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Fundbox - Line of credit

5.0/5

Best for Quick business loans for startups with bad credit

$150,000600

OnDeck - Online term loan

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5.0/5

Best for Unsecured startup business loans for bad credit

$250,000625

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Headway Capital - Line of credit

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5.0/5

Best for Low-revenue business loans for startups with bad credit

$100,000625

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SBA Microloan

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Best for Microloans for startups with bad credit

$50,000620

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National Funding - Equipment Financing

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4.5/5

Best for Equipment financing for startups with bad credit

$150,000600

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Accion Opportunity Fund - Small Business Working Capital Loan

4.0/5

Best for Startup business loans for women and minority groups with bad credit

$250,000570

AltLINE - Invoice Factoring

4.5/5

Best for Invoice factoring for startups with bad credit

$10,000,000300

Here are 8 startup business loans for bad credit

Best for Short-term business loans for startups with bad credit

Fora Financial

Max Amount

$1,500,000

Min. Credit Score

500

Best for Quick business loans for startups with bad credit

Fundbox

Max Amount

$150,000

Min. Credit Score

600

Best for Unsecured startup business loans for bad credit

OnDeck

Max Amount

$250,000

Min. Credit Score

625

Best for Low-revenue business loans for startups with bad credit

Headway Capital

Max Amount

$100,000

Min. Credit Score

625

Best for Microloans for startups with bad credit

U.S. Small Business Administration

Max Amount

$50,000

Min. Credit Score

620

Best for Equipment financing for startups with bad credit

National Funding

Max Amount

$150,000

Min. Credit Score

600

Best for Startup business loans for women and minority groups with bad credit

Accion

Max Amount

$250,000

Min. Credit Score

570

Best for Invoice factoring for startups with bad credit

AltLINE

Max Amount

$10,000,000

Min. Credit Score

300

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Our pick for

Short-term business loans for startups with bad credit

Fora Financial offers short-term business loans to borrowers with at least six months in business and a credit score of 500 or higher.

Fora Financial - Online term loan

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Max Loan Amount
$1,500,000
Min. credit score
500
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.

Max loan

$1,500,000

Min. Credit score

500

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.

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Our pick for

Quick business loans for startups with bad credit

Fundbox can approve and fund line of credit applications within 24 hours. You may be able to qualify with six months in business and a minimum credit score of 600.

Fundbox - Line of credit

Max Loan Amount
$150,000
Min. credit score
600
Est. APR
36.00-99.00%
Fundbox offers a business line of credit to fill a cash flow gap, and qualifying is easier than with other lenders.
May fund quickly

Max loan

$150,000

Min. Credit score

600

Apr range

36.00-99.00%

Fundbox offers a business line of credit to fill a cash flow gap, and qualifying is easier than with other lenders.

Our pick for

Unsecured startup business loans for bad credit

OnDeck does not require physical collateral or a down payment. You may be able to qualify with one year in business and a credit score of 625 or higher.

OnDeck - Online term loan

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Max Loan Amount
$250,000
Min. credit score
625
Est. APR
35.40-99.90%
OnDeck offers a fast term loan for small-business owners with less-than-stellar credit who want to expand.
May fund quickly

Max loan

$250,000

Min. Credit score

625

Apr range

35.40-99.90%

OnDeck offers a fast term loan for small-business owners with less-than-stellar credit who want to expand.

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Our pick for

Low-revenue business loans for startups with bad credit

Your startup may be able to qualify for a line of credit from Headway Capital with a minimum credit score of 625 and a monthly revenue of approximately $4,167 or more.

Headway Capital - Line of credit

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Max Loan Amount
$100,000
Min. credit score
625
Est. APR
35.00-80.00%
Headway Capital offers a fast and flexible line of credit for borrowers who may not qualify for more traditional options.

Max loan

$100,000

Min. Credit score

625

Apr range

35.00-80.00%

Headway Capital offers a fast and flexible line of credit for borrowers who may not qualify for more traditional options.

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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.

SBA Microloan

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Max Loan Amount
$50,000
Min. credit score
620
Est. APR
8.00-13.00%
SBA microloans are small-sized loans funded by the U.S. Small Business Administration and issued through approved intermediaries, typically nonprofit and community lenders.

Max loan

$50,000

Min. Credit score

620

Apr range

8.00-13.00%

SBA microloans are small-sized loans funded by the U.S. Small Business Administration and issued through approved intermediaries, typically nonprofit and community lenders.

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Our pick for

Equipment financing for startups with bad credit

National Funding can work with startups and borrowers with a credit score of 600 or higher.

National Funding - Equipment Financing

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Max Loan Amount
$150,000
Min. credit score
600
Borrowers who can't qualify for more traditional loan options might consider National Funding for fast access to capital.

Max loan

$150,000

Min. Credit score

600

Borrowers who can't qualify for more traditional loan options might consider National Funding for fast access to capital.

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Our pick for

Startup business loans for women and minority groups with bad credit

You may be able to qualify for a loan from Accion with 12 months in business and a minimum credit score of 570 or higher. Accion focuses its funding efforts in underserved communities — and says 90% of its borrowers are women, people of color, and/or low-to-moderate income.

Accion Opportunity Fund - Small Business Working Capital Loan

Max Loan Amount
$250,000
Min. credit score
570
Est. APR
8.49-29.67%
Accion is a good option for businesses that haven't been able to secure traditional financing. The lender targets its funding efforts toward minority, women and low-to-moderate-income entrepreneurs.

Max loan

$250,000

Min. Credit score

570

Apr range

8.49-29.67%

Accion is a good option for businesses that haven't been able to secure traditional financing. The lender targets its funding efforts toward minority, women and low-to-moderate-income entrepreneurs.

Our pick for

Invoice factoring for startups with bad credit

AltLINE has no minimum credit score or length of time in business requirements. It can advance up to 90% of your unpaid invoices, with rates as low as 0.80%.

AltLINE - Invoice Factoring

Max Loan Amount
$10,000,000
Min. credit score
300
AltLINE offers fast invoice factoring with competitive factoring rates.

Max loan

$10,000,000

Min. Credit score

300

AltLINE offers fast invoice factoring with competitive factoring rates.

How Much Do You Need?

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What is a bad credit score?

According to the most common scoring models, such as FICO and VantageScore, poor or bad credit scores can fall between 300 and 629, while scores between 630 and 689 may be considered fair. Length of credit history, mix of account types (loans, credit cards, etc.), delinquencies or poor payment history are among the factors that can influence your credit score.
Credit score requirements will vary based on your lender and the type of loan you’re looking for, but bad-credit business loans are generally available to 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 a low credit score or thin credit history, because these businesses don’t have an established financial history to prove they can repay their debts. Online lenders are typically more flexible and generally require six months to one year in business whereas banks often ask for two years or more.
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. Generally, these loans will have high annual percentage rates (APRs) because startup borrowers with bad credit are seen as riskier for the lender.
To qualify, your startup will typically need to be generating income already. For example, the Fundbox line of credit requires at least $8,333 in monthly revenue. You don’t usually have to provide collateral for these loans, though lenders may ask for a personal guarantee and/or take out a general lien on your business assets.
Online lenders may offer different types of business loans, such as short-term loans, business lines of credit, equipment financing and invoice factoring. Some 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.

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 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.

Merchant financing companies

Merchant financing is usually provided by the company that processes your credit or debit card sales, like PayPal or Square. It’s generally easier to qualify for than a typical business loan — for instance, PayPal only considers your sales history, not your credit score, when offering its working capital loans. The lender takes a fixed percentage of your sales until the loan is paid off.
Merchant financing may be a convenient option for startup businesses with consistent revenue but less than stellar credit. It's usually much more expensive than an online business loan or microloan, however, so we recommend looking into other options first.

How to get startup business loans with bad credit

1. 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 eligibility requirements vary by lender, you’ll typically want to have a minimum credit score of 500 or higher, at least six months in operation and consistent revenue to qualify for a startup business loan.

2. Calculate how much debt you can afford

A lower credit score and shorter time in business can result in higher interest rates — making it difficult to repay a new loan. You’ll want to figure out how much debt you can afford before comparing loan options.
You should break down different possibilities — taking into account how much funding you need, potential interest rates and the repayment schedule. Many startup business loans for bad credit have a daily or weekly repayment schedule which can negatively impact your cash flow.
Before moving forward, you’ll want to make sure that taking on a loan will actually benefit your business at this time.

3. Compare lenders — but beware startup business loans with guaranteed approval or no credit check

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.

🤓 Nerdy Tip

Predatory lenders often target borrowers who are having trouble qualifying for financing. Be wary of any lender that guarantees approval, advertises startup loans with no credit check, requires a fee to review your application and lenders that are not transparent about rates and terms. 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.

4. 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 ask you to provide:
  • A business plan.
  • Business and personal bank statements.
  • Business and personal tax returns.
  • Business financial statements, such as a profit and loss statement or a balance sheet.
  • Cash flow projections.
You may also be required to sign a personal guarantee.
Because a good business plan can help you get funding, you may want to take advantage of the free services offered by the SBA and organizations like Small Business Development Centers and SCORE. These organizations can help you prepare your business plan and other documents that are required by the lender.

5. Review agreement and get funds

Some online lenders can issue financing within 24 hours, whereas other lenders may take longer to approve and fund loans. Before making a decision, you’ll want to compare any and all loan offers to make sure you’re getting the best deal for your business.
Once you receive your business loan agreement, you should review the document thoroughly. You’ll want to ensure that you understand the terms and conditions — and address any questions or concerns you have with your lender — before signing.

Factors that can strengthen your loan application

Lenders consider businesses with bad credit to be less likely to repay their loans, but these strategies could help you lower the risk of default for the lender:
  • Build your credit. It may sound obvious, but improving your credit — both business and personal — can expand your loan options and access to better rates and terms. Ways to build credit include fixing mistakes in your credit report and paying down debt. Some lenders may offer business loans and lines of credit — backed up with cash deposits — that can be used to establish positive payment histories. Startups can also look to build business credit through actions like updating business information and uploading financial statements to business credit bureaus.
  • Offer collateral. Collateral, an asset that can be seized if you don’t repay the borrowed funds, can help you get financing and also access more competitive interest rates and repayment terms.
  • Add a cosigner. Having someone who agrees to take over payments on the business loan if you default, can make your application more favorable to a lender. Valuable cosigners usually have strong credit and personal finances.

Alternatives for borrowers with bad credit

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. And lenders only consider your personal financial profile, not your business history, when evaluating your application.

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. You can apply for a business credit card as a true startup — before you’ve generated any revenue at all — though card issuers may give more weight to your personal finances in those cases.

Family and friends loans

Borrowing money from family and friends may be a low-cost funding option if you can’t get a business or personal loan. The terms of the loan can be flexible because you’ll have the ability to work them out with your family member or friend. However, a written agreement with loan details can help you avoid misunderstanding down the road. Your lenders will also want to consider any IRS guidelines that may apply.

Small business grants

Instead of debt-based financing, you might apply for small-business grants that you don’t have to repay. Grants may be a good option if you’re a startup with consistent early revenue, but are facing credit challenges. Applying for grants can be competitive and time-consuming, but the payoff can be worth it if you secure one. Plus, there are specific startup business grants. Grant issuers want to support businesses that will last, so they typically look for evidence that a business idea will succeed.

Selling equity

Another alternative to debt financing is selling 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. Investors will probably want to review your business plan and may be more likely to invest if you can show strong early results.

Crowdfunding

If you’re still preparing to launch your business idea, you might try raising funds with crowdfunding — where donors receive a product or service related to your business in exchange for their contribution.

Find the right business loan

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 February 28, 2024

Methodology

NerdWallet’s review process evaluates and rates small-business loan products from both traditional and online lenders. We collect over 30 data points on each lender, taking into account features we consider to be small-business friendly, including: transparency of rates and terms, flexible payment options, fast funding times, accessible customer service, reporting of payments to business credit bureaus and responsible lending practices. Each small-business loan option on this list meets the following criteria: - Maximum loan amount of at least $50,000. - Transparent rates and repayment terms. - Funding available within two weeks of applying. - Personal credit score requirements of 625 or below. - No more than one year in business required.

Wondering if you qualify?

It’s possible to get a business loan even if you have bad credit. Bad-credit business loans are available from alternative sources, like online or nonprofit lenders.

Learn more

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