Business Bad Credit Loans and How to Get Application Approval

6 min read

Can’t get approved at traditional banks and credit unions? Then seek out approval for a bad credit business loan with same-day funding. Just be aware that a lower minimum personal credit score offer for a startup business loan usually has a high-interest rate attached that may be more than most business credit cards.

How to Apply

The easiest way to get an unsecured loan with bad business credit is to have at least six months of verifiable revenue via business bank statements. Even if it’s just three months’ worth of banking financials you will have options to get a business loan or line of credit that requires no personal guarantee.

If you don’t have monthly revenues of at least $3-$5k per month, then you’ll most likely either need collateral or a good personal credit score of 680 or higher. If your business has a bad credit score you should also look into utilizing Net 30 vendors to help build business credit.

Gross Revenue

Even with a bad business credit score and a business bank account with no real financial history, all is not lost. There are lots of lenders ready to approve requests from bad credit borrowers. In this category are the business owners who have 600 or lower personal credit scores. However, to get such bad credit loans there are minimum annual revenue requirements.

The company must secure $60,000 to $120,000 per year. In monthly revenues that’s around $5k-$10k. Furthermore, lenders will request proof of your revenue level. Mainly you have to present the last 3-6 business bank statements. You have a better perspective of qualifying if you can show financial reliability, the ability to cover the loan, and a stable cash flow to guarantee you make payments on time.


There is another way for poor credit businesses to offset a high debt-to-income ratio or a poor credit history. You can bring in collateral. Meaning you have to present lenders with a certain value that can guarantee your loan in case you won’t be able to make due payments.

If you opt for a hard money loan, a lien will be placed on the property in the contract. For this type of secured business loan, if you default on the repayment, the lender has the right to legally gain possession of your collateral.

Credit History

Even with lenders that go with bad credit borrowers, your payment history will still be reviewed to determine if you are safe to make on-time payments and to notice any spikes in overdue invoices. Other elements that could disqualify your loan are a previously declared bankruptcy, or if you have filed for foreclosure. Thus borrowing from alternative lenders with competitive interest rates, may not be a variant in this case.

Debt Ratio

If you already have an outstanding debt from a previous business loan can be an obstacle to getting additional financing. When it comes to borrowing more, lenders request a debt-to-income ratio with a maximum of 30-40%. You can compensate for this situation by having a high monthly revenue and consistent average monthly bank deposits.

Many lenders will not consider your debt as an obstacle as long as you have the other indicators at a good level. You have to demonstrate that you are currently capable of repaying them and that you have the loan payment priority clear.

Business Plan

Lenders most often want to see proof of having a solid business plan even if you request a small loan of $100K or less. You need to present them in detail where you intend to spend the loan funds. They want to determine if granting you money is a worthy and safe investment.

Loan Types

While Small Business Administration (SBA) loans are the most sought-after, they are impossible to get approval for without good credit. Startup business loans usually require you to have at least 660-680+ a FICO score, while loan approval for merchant cash advances and invoice factoring are mainly focused on gross monthly revenue.

Other funding options like equipment financing and real estate investor lines of credit require collateral to your loan application approved. So, before you apply to any alternative lender, be sure you who which loan type you are most likely to qualify for.

Merchant Cash Advances

The Merchant Cash Advance, or MCA, is a financial product used to analyze past revenues and sales to decide the loan amount you qualify for. The MCAs are also called working capital loans, or business cash advances. The merchant cash advance payments are deducted from future sales, either daily or weekly.

Thus, the most important approval factor for MCAs is the sales volume. In this type of business financing, your chances to get funded are high even with a bad personal credit score. What you still need to provide for loan approval is a minimum monthly revenue amounting to $5-10k. Furthermore, a lender will also impose a minimum credit score requirement, somewhere between 450-600.

Invoice Factoring

This is a financing method that leverages the outstanding invoices of a company. The purpose of invoice financing is to assist businesses in need to manage cash flow issues. Working with an invoice factoring company is opposed to taking a loan from traditional banks, as the former focuses on your accounts receivables and is not much concerned about low credit scores.

In general, this funding solution goes with a cash advance rate of around 85% off all invoices purchased. The money is released within several business days. The invoice payments are collected for 30 to 90 days, and afterward, you can get the remaining balance.

This method answers the short-term financing needs of small business owners. The process includes selling all the unpaid customer invoices to third-party invoice factoring companies to get the cash. There are invoice factoring fees that range between 1-5%. Their variation is determined by invoice terms, industry, and business owner creditworthiness. You must also factor add in all extra costs, like servicing or processing fees, bank or wires fees, application or setup fees, and early termination or monthly minimum fees.

Equipment Financing

Just by complying with the minimum credit score requirements, you can find online lenders available to lease or finance equipment for the newly established small business owner. Equipment financing includes a wide variety of machines, from heavy construction equipment to the company vehicle, to restaurant kitchen appliances, and much more. You can use this type of financing to borrow or purchase the respective physical asset that you need for your business.

This only simplifies the process for businesses as this physical asset will serve as collateral before the lender. It completely differs from typical small business loans and other bad credit business loans. In case of your payment default on your business lease or loan, automatically the lender has the right to repossess the asset. The advantage for the borrower consists of an easier application and almost guaranteed approval. On the other hand, there is less risk for the lender and a higher for the business.

The responsibilities differ from small business loan options. You have to always focus on what and from whom you’re buying before you get a financing quote. Most likely the money will never directly enter your business bank account. The equipment financing terms differ from your financing option, loan, or lease, and can spread over a period between 2 and 7 years.

As the equipment financers are covering a large percentage or even all of the equipment cost. For this reason, the lenders prefer to pay the vendor directly. Afterward, you will start making monthly payments to cover the principal and the added interest. In case you default, the financer gets to repossess your equipment and can decide to resell it.