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Best Business Loans for Startups With Bad Credit in 2023

Startup business loans are available if you have bad credit, but shop carefully to keep costs in line.
By Ryan Lane, Randa Kriss
Last updated on January 3, 2023
Edited bySally Lauckner

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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.
Online lenders usually won’t require you to put up collateral to overcome poor credit and get funding. But startups will typically need at least six months in operation and a track record of generating revenue during that 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 for bad credit

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Lender
NerdWallet Rating
Max loan amount
Min. credit score
Next steps

Fora Financial - Online term loan

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4.5/5

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

$1,400,000500

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Fundbox - Line of credit

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5.0/5

Best for Business line of credit for startups with bad credit

$150,000600

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SBA Microloan

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Best for Microloans for startups with bad credit

$50,000620

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Triton Capital - Equipment financing

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4.0/5

Best for Equipment financing for startups with bad credit

$250,000600

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Here are 4 startup business loans for bad credit

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

Fora Financial

Max Amount

$1,400,000

Min. Credit Score

500

Best for Business line of credit for startups with bad credit

Fundbox

Max Amount

$150,000

Min. Credit Score

600

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

Triton Capital

Max Amount

$250,000

Min. Credit Score

600

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

4.5
NerdWallet rating 
Read Review

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Max Loan Amount
$1,400,000
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.
4.5
NerdWallet rating 

Max loan

$1,400,000

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.
Read Review

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Our pick for

Business line 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

5.0
NerdWallet rating 
Read Review

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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
5.0
NerdWallet rating 

Max loan

$150,000

Min. Credit score

600

Apr range

10.10-79.80%

Depending on your creditworthiness and your business's financials

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

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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. 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.

Max loan

$50,000

Min. Credit score

620

Apr range

8.00-13.00%

Depending on your creditworthiness and your business's financials

The average microloan is roughly $13,000, according to the Small Business Administration.
Read Review

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Our pick for

Equipment financing for startups with bad credit

Equipment financing typically uses the piece of equipment you're buying as collateral, so loans may be available to bad-credit borrowers. But startups may need to pay more for financing.

Triton Capital - Equipment financing

4.0
NerdWallet rating 

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Max Loan Amount
$250,000
Min. credit score
600
Est. APR
5.99-35.00%
Triton Capital offers fast equipment loans up to $250,000 for businesses in a range of industries.
4.0
NerdWallet rating 

Max loan

$250,000

Min. Credit score

600

Apr range

5.99-35.00%

Depending on your creditworthiness and your business's financials

Triton Capital offers fast equipment loans up to $250,000 for businesses in a range of industries.

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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. Online lenders generally require one year in business; banks often ask for two 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 because startup borrowers with bad credit are seen as riskier for the lender.
To qualify, your startup will 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.
Online lenders may offer different types of business loans, such as short-term loans, business lines of credit and invoice financing. 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, 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.
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 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 an option for businesses with consistent revenue but bad credit. But it’s usually much more expensive than online business loans or microloans, 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 600, at least six months in operation and consistent revenue to qualify for a startup business loan.

2. 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.

3. Watch out for startup business loans with no credit check

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.

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:
  • 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.

5. 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.
For startups that haven’t generated revenue yet:
  • 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.
  • 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.
In addition to the options above, startups with consistent early revenue but bad credit may also want to consider:
  • 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 startup business grant options. 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.

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 January 3, 2023

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