Getting a Small Business Loan with Bad Credit: A 2024 Guide

October 27, 2023

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What is the Minimum Credit Score to Get a Business Loan?

Banks and financial institutions often have a minimum credit score requirement for business financing. However, this threshold varies among lenders. While a good credit score can open doors to various financing options with favorable interest rates, a low credit score doesn’t necessarily close them.

Are There Other Types of Funding Available Besides a Business Loan?

Yes, it’s possible. While lenders may be wary of borrowers with a credit score around 500, that does mean you are out of luck because you have poor credit. While most people tend to think about loan options, alternative financing may fit your business needs better when your FICO score is low.

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Types of Business Loans and Alternative Financing Options for Poor Credit

Merchant Cash Advances (MCA)

An MCA is not a loan but a lump sum of capital given upfront in exchange for a share of your future revenue. This is an excellent option for businesses with strong cash flow but poor credit. iCapital Funding, for example, offers a preferred MCA that can cater to businesses even if they have a bad credit score.

Invoice Factoring

This is where a business sells its receivables (invoices) to a third-party company (a factor). It’s a way to get immediate cash flow without waiting for clients to pay.


Microloans cater specifically to startups and new businesses in need of smaller loan amounts.

Short-Term Loans

These are like more loans but have shorter repayment terms and often come with higher interest rates.

The Business Loan Application Process with Poor Credit

Can I Get a Loan to Start a Business with Bad Credit?

Starting a business with bad credit may be challenging, but it’s not impossible. If you are set on a loan, one crucial step is creating a compelling business plan. Lenders want to know that you have a viable plan for success. If your business plan is robust and shows promise, some lenders might overlook a bad credit history.

What about Other Types of Financing?

Most funders in the MCA world require that you have a business bank account and 3-4 months of business bank statements as an eligibility requirement. Qualifying is more focused on monthly revenue and cash flow as underwriting wants to know that your future revenue will allow repayment.

How Do I Get a Business Loan with Bad Credit?

Research Funders

Online lenders and alternative funders are more likely to offer bad credit business loans than traditional banks.

Prepare Documentation

Ensure you have all your financial documentation ready, from bank statements to business plans. Remember, documentation will vary based on the type of financing that you want.

Complete the Application

Again, this varies by the type of product you want. Equipment financing, business line of credit, working capital loans, and MCAs will all have vastly different application processes. MCAs typically go quickly. The application takes just a few moments and you can often get funded the same day. Funding options like SBA loans on the other hand can take weeks.

Understanding the Nuances

What if I Have a Bankruptcy on My Credit Report? Bankruptcy can make obtaining business financing challenging. However, the impact diminishes over time. Some funders might still consider your application, especially if you can demonstrate that your business is on a solid footing now. Business funding for those with bankruptcy is usually easier to obtain from alternative funders

Can I Get a Business Loan with my EIN Number? Your Employer Identification Number (EIN) can help establish business credit separately from personal credit. However, for businesses with a bad credit score, banks may still look at the personal credit score of the owner.

What is the Difference between a Business Loan and a Personal Loan? While both can provide necessary capital, a business loan is specifically for business expenses and often requires a business credit check or a personal guarantee. Personal loans, on the other hand, are based on the individual’s creditworthiness and may not require a business plan or business credit score.

How is a Business Loan Different than an MCA?

There are many subtle differences in loans versus merchant cash advances. One example, is loans use interest rates whereas merchant cash advances use factor rates. Another is that some are secured, while others are unsecured. Similarly, loans often require a down payment while MCAs do not. Additionally, the speed at which funding happens is very unique – MCAs can fund in as little as a single business day whereas loans can take weeks or months.

Closing Thoughts

Navigating the world of bad credit business loans can seem overwhelming. But remember, a low credit score doesn’t mean an end to your entrepreneurial dreams. Explore options like merchant cash advances, especially through trusted providers like iCapital Funding, to get the working capital you need to grow and thrive.

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