Securing a business loan with bad credit can be a challenging endeavor, but it is not impossible. In 2025, alternative lenders, government programs, and financial strategies have made it easier for entrepreneurs with low credit scores to access funding. Whether you need capital to expand your business, purchase inventory, or manage cash flow, there are options available. This comprehensive guide explores different ways to get a business loan with bad credit, the best lenders to consider, and strategies to improve your approval chances.
Understanding Business Loans and Credit Scores
What is a Business Loan?
A business loan is a type of financing that companies use to cover expenses such as operational costs, equipment purchases, marketing campaigns, and more. Business loans can come from traditional banks, credit unions, or alternative lenders.
What is Considered Bad Credit?
Bad credit is typically defined by a low credit score, usually below 600. Credit scores are classified as follows:
- Excellent: 750+
- Good: 700-749
- Fair: 650-699
- Poor: 600-649
- Bad: Below 600
Lenders use credit scores to determine the risk of lending money to borrowers. A lower credit score means a higher perceived risk, which can result in loan denials or high-interest rates.
Types of Business Loans Available for Bad Credit
1. Online Business Loans
Online lenders specialize in offering loans to business owners with bad credit. They assess factors beyond credit scores, such as business revenue, cash flow, and operational history.
Pros:
- Fast approval process
- Less strict credit requirements
- Competitive rates compared to traditional banks
Cons:
- Higher interest rates than traditional lenders
- Shorter repayment terms
2. Microloans
Microloans are small loans typically provided by non-profit organizations, government programs, and community lenders.
Pros:
- Easier to qualify for than traditional loans
- Designed to help small businesses and startups
- Often come with mentorship programs
Cons:
- Smaller loan amounts
- Can take longer to process
3. Merchant Cash Advances (MCA)
Merchant cash advances provide businesses with a lump sum in exchange for a percentage of future sales.
Pros:
- No strict credit score requirements
- Quick access to funds
- Flexible repayment based on sales
Cons:
- High fees and interest rates
- Can create cash flow issues if sales drop
4. Invoice Financing
Invoice financing allows businesses to borrow money against outstanding invoices. This type of loan is suitable for businesses with consistent invoicing but slow-paying clients.
Pros:
- No collateral required
- Faster approval than traditional loans
Cons:
- Fees can be high
- Only applicable for businesses with invoices
5. Business Credit Cards
Business credit cards can help with short-term funding needs and allow business owners to build credit over time.
Pros:
- Easier approval than traditional loans
- Helps build business credit
- Rewards and cashback benefits
Cons:
- High-interest rates on unpaid balances
- Can lead to excessive debt if misused
6. Equipment Financing
Equipment financing allows businesses to purchase equipment with a loan secured by the equipment itself.
Pros:
- Equipment serves as collateral, reducing lender risk
- Lower credit score requirements than unsecured loans
Cons:
- Only applicable for equipment purchases
- If you default, the lender can repossess the equipment
Best Lenders for Bad Credit Business Loans in 2025
Here are some of the top lenders that offer business loans to entrepreneurs with bad credit:
- OnDeck – Offers short-term loans with a minimum credit score requirement of 600.
- BlueVine – Provides invoice financing and lines of credit with flexible terms.
- Kabbage (now part of American Express) – Specializes in lines of credit for businesses with lower credit scores.
- Fundbox – Focuses on invoice financing and working capital loans.
- Lendio – A loan marketplace that connects borrowers with multiple lenders.
How to Improve Your Chances of Getting a Business Loan
1. Improve Your Credit Score
- Pay bills on time
- Reduce outstanding debt
- Monitor your credit report for errors
2. Prepare a Solid Business Plan
Lenders want to see a clear roadmap for how you will use the loan and how you plan to repay it. A well-structured business plan can strengthen your application.
3. Show Consistent Revenue
Lenders often look at business revenue to assess your ability to repay the loan. Keeping detailed financial records can help demonstrate your business’s stability.
4. Offer Collateral or a Personal Guarantee
Providing collateral (such as real estate, equipment, or inventory) or a personal guarantee can help offset the risk for lenders.
5. Work with Alternative Lenders
Traditional banks may have strict credit requirements, but alternative lenders often focus more on business performance than credit scores.
Conclusion
Getting a business loan with bad credit in 2025 requires persistence and a strategic approach. While traditional banks may be hesitant to lend to businesses with low credit scores, alternative lenders, government programs, and creative financing options make it possible to secure funding. By understanding the available loan options, improving your financial profile, and choosing the right lender, you can increase your chances of obtaining the capital you need to grow your business.
If you have bad credit and need a business loan, start by researching lenders that specialize in bad credit financing, preparing a strong business plan, and demonstrating steady revenue. With determination and careful planning, you can secure the funding necessary to achieve your business goals.