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Online Small Business Funding with Bad Credit

By Richard Wilson

Last Updated on

Estimated read time: 7 minutes

In today’s tight economy, it’s getting more and more difficult to get a small business loan if you have bad credit.

Lenders, like banks, are really strict now about lending and use your credit score and credit history to figure out if lending money to you is a safe bet.

So, if you have bad personal credit or bad business credit, it is becoming very difficult to get any type of business funding from traditional lenders, like banks, credit unions, the Small Business Administration (SBA), and others.

An easier way to secure funding for your business if you have bad credit is to apply with online lenders that specialize in funding businesses with poor credit scores.

In this article, we will guide you through the 4 key steps you need to take to get a business loan with bad credit and the impact a bad credit has on your ability to get business funding.

How To Get An Online Small Business Loan With Bad Credit

Below is a table highlighting the 4 key steps to take get a bad credit business loan:

Step 1. Confirm How Bad Your Credit IsChecking your credit score using 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 ForUnderstanding the different online loan types and eligibility criteria will help you choose appropriate lenders even with poor credit.
Step 3. Choose Trusted Online LendersCheck 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 FundingIncrease 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: Confirm How Bad Your Credit Is

Before you apply for a bad credit business loan, it is important to confirm how bad your business and personal credit scores are. Knowing your exact credit situation and knowing your exact score will help you identify which online lenders may consider your application based on your credit score. Most lenders will use FICO credit scores to evaluate your creditworthiness. You can check your FICO credit score for free at

Below is a breakdown of what each FICO score range means in terms:

FICO scores are grouped as follows:

  • Exceptional (800 – 850)
  • Very good (740 – 799)
  • Good (670 – 739)
  • Fair (580 – 669)
  • Poor (300 – 579)

If your FICO credit score falls between 300 to 580, which is considered poor to fair, this means you have what’s known as bad credit. Now that you know your exact FICO credit score and understand how bad your credit is, the next step is to find online lenders that accept applications for bad credit business funding with your credit score.

Step 2: Determine Which Types of Online Business Finance You Qualify For

Online lenders offer a range of different business funding options for businesses with poor credit. There are seven main types of online business loans:

  1. Business Cash Advances: Get quick funding based on future credit card sales.
  2. Business Lines of Credit: Borrow only what you need and pay interest just on that. Great for ongoing cash needs.
  3. Invoice Factoring: Turn unpaid invoices into quick cash. Service fees are 1% to 5% per invoice.
  4. Revenue-Based Financing: Get money now, pay back with a slice of future sales. Ideal if you have steady income.
  5. Asset-Based Loans: Use your business assets as loan security. Rates are competitive, between 5.25% and 15%.
  6. Equipment Leasing: Lease anything from machines to furniture. Pay monthly, with rates from 7% to 16%.
  7. Equipment Financing: Buy equipment and pay overtime. You’ll own it at the end and can pay back over 3 to 5 years.

Each of these types of alternative financing for poor credit has different requirements, such as minimum credit score, monthly revenue, and time in business. Below is a table outlining the most common eligibility criteria for each loan type:

Alternative Finance TypeInterest RatesCredit ScoreCost
Business Cash Advances1.1 to 1.5Minimum of 550+High
Business Lines of Credit8% to 60%Minimum of 600+Moderate
Invoice Factoring1% to 5% per monthMinimum of 550+Moderate
Revenue-Based Financing2% to 10% of your monthly revenueMinimum of 580+Moderate
Asset-Based Loans5.25% to 15%Minimum of 580+Average
Equipment Leasing7% to 16%Minimum of 550+Average
Equipment Financing 4% to 30%Minimum of 550+Average

It’s important to note that all of these loan types often come with high interest rates and less favorable terms. Financial advisors commonly recommend these options only if traditional lenders are inaccessible and capital is urgently needed. 

Now that you’re aware of the eligibility requirements for each loan type, the next step is to select a reputable online lender to apply to.

Step 3. Choose Trusted Online Lenders

McashAdvance is a trusted online lender and we provide Merchant Cash Advances which are a great alternative to a business loan for bad credit.

Get a Bad Credit Business Loan Alternative Now

MCA Feature Offer Details
MCA Amounts: $5,000 – $900,000
Factor Rate: 1.1 – 1.5
Holdback 10 – 25%
Repay In: 3 – 18 months
Funding Time: 1 – 3 days

Applying is easy, free, and won’t impact your credit score.

Get the business you need today even if you have bad credit.

Make sure to visit the online lender’s website to look for case studies of loans they’ve provided. Check if they’ve funded businesses similar to yours in both industry and credit. It’s also important not to take the lender’s word as absolute truth.

You can rely on two popular platforms where real people share their experiences with online lenders: and

You can check for independent reviews by searching for the lender’s business name and location on Google Maps. This way, you can get insights from people who have interacted with the lender firsthand. Simply visit and type in the business’s name and location to see if there are any Google business reviews available in their business profile.

Step 4: Improve Your Chances of Securing Funding

Below are 5 ways to improve your chances of securing the funding you need, even with bad credit.

  1. Only apply to online lenders where you meet their eligibility criteria.
  2. Focus on applying to lenders that conduct soft credit inquiries instead of hard checks to avoid negatively impacting your credit score.
  3. Be proactive and reach out to the online lender to discuss your business funding needs and explain why you have bad credit.
  4. Be honest about your business’s financial situation when communicating with online lenders.
  5. Consider offering collateral such as business assets or personal assets to strengthen your loan application.
  6. Consider offering a co-signer or offering a personal guarantee to the lender to reassure lenders of your commitment to repayment.

Understanding How Bad Credit Affects Your Business

When you or your business has poor credit, there’s a lot to consider, whether you’re applying for a business loan or trying to improve your credit.

Impact of Credit Score on Interest Rates

The lower your credit score, the higher interest rates online lenders will charge you for funding. Higher scores mean less risk for lenders.

Repaying Bad Credit Loans

It’s crucial to repay every installment of a bad credit loan on time. Doing so can actually improve your credit, making you eligible for better terms and rates in the future from traditional lenders.

Importance of Business Age and Monthly Income

The age of your business and its monthly income are essential factors for funding. Online lenders typically prefer businesses with at least six months of trading history. They assess your ability to repay based on your revenue and expenses, evaluating your debt-to-income ratio to determine eligibility for funding.

Predatory Lending Trap

Predatory lending is when lenders take advantage of businesses, often those with poor credit, by charging high fees, interest rates, or unfair terms. These lenders may use deceptive tactics to lure business owners into loans they cannot afford to repay, leading to financial hardship for the business. 

It’s important to vet all lenders you intend to apply to that offer bad credit loans as they may be predatory lenders, watch out for unethical, inaccurate marketing, hidden fees, and avoid lenders who engage in predatory practices to protect yourself and your business from financial harm.

Ready to Apply?

or learn more about merchant cash advances with bad credit

The Bottom Line

Applying for any type of online business financing with bad credit requires careful research and planning. While these loans may offer a lifeline, they will come with high interest rates and less favorable terms. Choosing a reputable lender and conducting thorough research is key. Being transparent and proactive in communication with online lenders can increase your chances of getting approved. Check online reviews from online lenders’ customers to protect yourself against predatory lending practices.

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