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Bad Credit? Where to Find Small-Business Loans

June 7, 2018
Small Business, Small Business Loans
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Bad credit, defined by FICO as a score of 300 to 629, is a common reason that banks reject small-business loan applications. Borrowers with a poor credit score are seen as being at a higher risk of defaulting on a loan. But, if you have bad credit, there still may be some financing options available to you.

How do you get a business loan with bad credit?

Alternative lenders provide options for borrowers with a spotty credit history. Most of these lenders require a minimum personal credit score ranging from 500 to 650. A few lenders have no minimum credit score requirement.

These companies typically focus more on the strength of your business than on your personal credit score. Factors considered include your annual revenue, time in business and whether you’ve had recent bankruptcies.

Borrowers should consider the following before choosing a financing option:

    • The lower your credit score, the more likely you’ll have a higher annual percentage rate, which includes your interest rate and all fees, on your loan.
    • If you have unpaid customer invoices, you can get immediate cash through invoice factoring or financing. While lenders may still check your credit score, approval is based mainly on the value of your invoices.
    • If you could wait and improve your personal credit, you may qualify for more options at better rates.

Here are our recommendations if you have poor credit:


If you have less than a year in business

If your enterprise is less than a year old with little revenue, it’ll be tough to find a loan, no matter your credit. Here are startup financing options to help you grow your company.

Potential options include business credit cards, which typically provide borrowing amounts up to $50,000. However, approval is based on your personal credit score, and you’ll need a minimum credit score of 630 to qualify for most cards.

If you need to improve your credit score, consider getting a secured personal credit card first. These cards require a cash security deposit when you open the account. However, use the card responsibly, and you’ll improve your personal credit and get back your deposit.

If your personal credit score is 500 or higher

Fundbox, Kabbage and Quarterspot provide short-term cash for working capital.

Fundbox’s line of credit is a good fit for businesses that need working capital of up to $100,000. Qualifying requires a minimum of $50,000 annual revenue and at least three months in business, with no personal credit score requirements.

Kabbage provides working capital loans of up to $250,000. It doesn’t require a minimum credit score, but most of its borrowers have a score of at least 500, according to the company. You’ll also need a minimum of $50,000 in annual revenue and a year in business, and you have to use a business checking or online payment platform.

  • Loan amount: $2,000 to $250,000.
  • APR: 24% to 99%.
  • Loan term: 6 or 12 months.
  • Funding time: A few minutes to several days.
  • Read our Kabbage review.
Apply now at Kabbage

Line of Credit

  • Loan amount: $1,000 to $100,000
  • APR: 10.1% to 79.8%
  • Loan term: 12 weeks
  • Funding time: As fast as next business day
  • Read our Fundbox review
Apply now At Fundbox

If you need higher borrowing amounts and have strong annual revenue, Quarterspot provides financing of up to $200,000. The company requires a minimum credit score of 550 and does a soft credit pull, so applying won’t hurt your credit score. You’ll also need at least one year in business and $200,000 annual revenue to qualify.

  • Loan amount: $5,000 to $200,000
  • APR: 30% to 70%
  • Loan term: 9, 12 or 18 months
  • Approval time: As fast as 24 hours
  • Read our QuarterSpot review
Apply now at QuarterSpot

 

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If your personal credit score is 600 or higher

StreetShares offers financing up to $150,00, and BlueVine offers up to $250,000.

Besides offering invoice factoring, BlueVine has a 6-month line of credit for those with just six months of business history and $120,000 in annual revenue and a 12-month line of credit for those with 2 or more years in business and annual revenue of $450,000. The lender is a good fit for short-term working capital.

StreetShares offers a term loan and line of credit at lower APRs than BlueVine. It also has a longer repayment term of up to three years compared with BlueVine’s six or 12 months.

Term Loan

  • Loan amount: $2,000 to $150,000
  • APR: 9% to 40%
  • Loan term: 3 to 36 months
  • Funding time: 1 to 5 days
  • Read our StreetShares review
Apply now at StreetShares

Line of Credit

  • Loan amount: $5,000 to $250,000.
  • APR: 15% to 78%.
  • Loan term: Repaid over 6 or 12 months.
  • Funding time: As fast as 24 hours.
  • Read our BlueVine review.
Apply now at BlueVine


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If you have unpaid customer invoices

Fundbox and BlueVine let you turn your unpaid customer invoices into immediate cash. They typically evaluate the strength of your customers, such as whether they pay on time, more than your personal credit.

Consider Fundbox’s invoice financing if you need less than $100,000 in financing. Borrowers pay a median fee of 7% on each invoice advance on a 12-week repayment option and 15.7% on a 24-week option.

BlueVine is a good option for businesses with larger invoices of up to $5 million. BlueVine charges a weekly fee of 0.5% to 1% of the invoice amount. The fee drops by 0.1 to 0.2 percentage points for borrowers whose clients pay their invoices on time.

Invoice financing

  • Loan amount: $1,000 to $100,000
  • APR: 10.1% to 68.7% for 12 weeks; 11.4% to 78.6% for 24 weeks
  • Loan term: Equal repayments over a 12- or 24-week period
  • Funding time: As fast as the next business day
  • Read our Fundbox review
Apply now at Fundbox

Invoice Factoring

  • Loan amount: $20,000 to $5 million.
  • APR: 15% to 68%.
  • Loan term: 1 to 13 weeks
  • Funding time: 1 to 3 days.
  • Read our BlueVine review.
Apply now at BlueVine


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Bad credit business loans: Summary of options

Funding options for bad creditGood option for: Do you qualify?Loan amount & APR
fundbox

Line of credit


Apply now at Fundbox

• Fast cash
• Short-term working capital
No minimum personal credit score
• 6+ months in business
• $25,000+ annual revenue

• $1,000 to $100,000
• 15% to 59%
Kabbage_Logo_150x40
Apply now at Kabbage
• Fast cash
• Short-term working capital
No minimum personal credit score (most borrowers have 500+)
• 1+ year in business
• $50,000+ annual revenue
• Must have business checking account, bookkeeping software or payment platform
• $2,000 to $250,000
• 24% to 99%

SMB quarterspot logo
Apply now at QuarterSpot
• Fast cash
• Short-term working capital
550+ personal credit score
• 1+ year in business
• $200,000+ annual revenue

• $5,000 to $200,000
• 30% to 70%
Street Shares
Apply now at StreetShares
• Working capital
• Loans under $150,000
600+ personal credit score
• $75,000+ annual revenue
• 1+ year in business
• $2,000 to $150,000
• 9% to 40%
bluevine

Line of credit


Apply now at BlueVine
• Businesses with strong revenue
600+ personal credit score (6-month LOC), 650+ (12-month LOC)
• $120,000+ annual revenue (6-month), $500,000 (12-month)
• 6+ months in business (6-month), 2+ years in business (12-month)
• $5,000 to $200,000
• 15% to 78%
fundbox

Invoice financing


Apply now at Fundbox
• Fast cash
• Businesses with unpaid customer invoices
No minimum personal credit score
• No minimum annual revenue
• Minimum 6 months' activity in online accounting or bookkeeping software that can link to Fundbox
• $1,000 to $100,000
• 16.4% to 76.5%
bluevine

Invoice factoring


Apply now at BlueVine
• Businesses with unpaid customers invoices530+ personal credit score
• $100,000+ annual revenue
• 3+ months in business
• $20,000 to $5 million
• 15% to 68%

Need more options?

If none of these works for you, or if you’d like to compare loan options, NerdWallet has a list of small-business loans that are best for business owners. All of our recommendations are based on the lender’s market scope and track record and on the needs of business owners, as well as rates and other factors, so you can make the right financing decision.

 

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