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Getting business funding with bad credit used to be rare. Today, it’s more common, but it still requires knowing where to look, how to qualify, and what to avoid.
We work with business owners every day who’ve been turned down by banks and need another option. In this article, we’ll walk you through the steps to get funded online, even with poor credit, and help you avoid common traps that can make a tough situation worse.
Why Bad Credit Makes Business Funding Harder
Traditional lenders like banks, credit unions, and the SBA use your personal and business credit scores to decide whether you’re worth the risk. If your score is below 600, they will likely decline your application, no matter how much revenue your business brings in.
Even if you’ve been trading for years, poor credit from past late payments, tax liens, or defaults can still block you.
That’s where online lenders come in. Some specialize in alternative funding that does not rely solely on credit score. Instead, they look at cash flow, daily card sales, time in business, and industry type to decide.
How To Get an Online Small Business Loan With Bad Credit
Below is a table highlighting the 4 key steps to take to get a bad credit business loan:
| Steps | Description |
|---|---|
| Step 1. Confirm How Bad Your Credit Is | Checking your credit score using myfico.com will help you understand your poor credit rating and exact score, enabling you to identify online lenders that accept applicants with similar credit scores. |
| Step 2. Determine Which Types of Online Business Finance You Qualify For | Understanding the different online loan types and eligibility criteria will help you choose appropriate lenders even with poor credit. |
| Step 3. Choose Trusted Online Lenders | Check third-party customer reviews on review platforms to verify how reputable and trustworthy the lender is, ensuring you only apply to trustworthy lenders. |
| Step 4. Improve Your Chances of Securing Funding | Increase your chances of securing funding by applying to lenders whose eligibility requirements you meet and consider offering collateral or a co-signer to strengthen your application. |
Step 1: Know Where You Stand
Start by checking your FICO score at myfico.com. Most online lenders still check your score, even if it is not the only thing they consider.
Here’s how FICO credit scores are ranked:
| FICO Range | Category |
|---|---|
| 800–850 | Exceptional |
| 740–799 | Very Good |
| 670–739 | Good |
| 580–669 | Fair |
| 300–579 | Poor |
If your score falls under 600, you’re considered a bad credit borrower. That does not mean you can’t get funded, but you will need to focus on lenders who accept that range.
Step 2: Know What You Can Apply For
There are multiple online funding types that may work for bad credit. Each has different approval criteria and repayment terms:
| Funding Type | Typical Rate / Cost | Credit Score | Key Requirements |
|---|---|---|---|
| Merchant Cash Advance | Factor rate 1.1–1.5 | 550+ | Daily sales, time in biz |
| Business Line of Credit | 8% to 60% APR | 600+ | Monthly revenue, open bank account |
| Invoice Factoring | 1–5% per invoice | 550+ | Unpaid invoices, B2B billing |
| Revenue-Based Financing | 2–10% of monthly revenue | 580+ | Consistent income, short application |
| Asset-Based Loans | 5.25% to 15% APR | 580+ | Collateral, longer term |
| Equipment Leasing | 7% to 16% monthly | 550+ | Equipment quotes, ID, license |
| Equipment Financing | 4% to 30% over 3–5 years | 550+ | Business age, quotes, tax ID |
Not all lenders offer every type. Some specialize in just one. You may also be asked for documents like:
- 3 to 6 months of business bank statements
- Voided check
- Business license
- Tax ID or EIN
- Government-issued ID
Step 3: Choose Reputable Lenders
You should never apply blindly. We’ve seen business owners get locked into stacked loans, hidden fees, or agreements that included a confession of judgment without realizing it.
Here’s how to check if a lender is legitimate:
- Search their business name on Google Maps to see real customer reviews
- Visit trustpilot.com or reviews.io for verified borrower feedback
- Look for transparent terms on their website, not just “fast cash” promises
- Ask if they report your repayment history to business credit bureaus
- Ask if they file a UCC lien on your business
We offer Merchant Cash Advances ourselves, but we will always walk you through the full agreement before funding. That includes the holdback percentage, factor rate, total payback, and any request for a personal guarantee.
Step 4: Improve Your Chances of Approval
Getting funded with bad credit is possible, but you still need to meet the provider’s minimum criteria. Here’s how to improve your odds:
- Apply only to lenders who accept your score and business profile
- Focus on providers that use soft pulls instead of hard credit checks
- Offer collateral or a co-signer if available
- Explain your situation upfront, especially if your credit issues were temporary
- Avoid applying to too many lenders at once, which can lower your score further
If you get denied, do not panic. Ask for feedback and wait a few weeks before applying again, or consider other options like invoice factoring or revenue-based financing.
What to Watch Out For
Online funding is faster, but it also comes with risks. Here’s what to be aware of:
High Costs
Expect higher rates or factor multipliers than you would find at a bank. That is the tradeoff for speed and access.
Daily Deductions
Many bad credit products, like MCAs or revenue-based loans, deduct repayments daily or weekly from your bank account. This can squeeze your cash flow if not managed carefully.
Confession of Judgment Clauses
These allow the lender to get a court judgment against you without a hearing. We do not use these, but many online funders still do.
Stacking Risk
Taking out multiple loans from different providers, called stacking, can cause you to default on all of them. Avoid it unless your revenue can support it.
UCC Liens
Some lenders will file a UCC-1 lien on your business. This gives them rights to your business assets if you default.
Can Online Funding Help You Rebuild Credit?
Yes, if managed well.
Paying back your online funding on time can:
- Improve your business credit profile
- Show responsible use of capital
- Help you qualify later for lower-cost funding from traditional lenders
But it only works if the lender reports repayments to the bureaus, so ask.
We fund business owners with subprime credit, scores even in the 500s. If you apply with us, we will tell you upfront what we need to approve you. That includes whether we require a personal guarantee or collateral based on the risk.
We do not hide anything in fine print. And we encourage you to compare offers, read every agreement, and ask questions before accepting funds.
Getting funding with bad credit is possible. Just make sure it helps your business move forward, not backward.
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