A bad credit business loan can be challenging to find, but it’s not impossible. If you have a FICO score between 300 and 669, you’ll likely need to consider alternative funding solutions. But don’t fret! There are many banks and finance companies that have options to fit your small business needs.

Learn more about how to get approved with poor credit when applying for small business loans in this article. Here we will dive into some of the most valuable pieces of getting a bad credit business loan, including:

  • The value of checking your personal credit score
  • A path to improvements on your personal credit rating
  • Taking full advantage of business loan brokers
  • Making use of a secured business loan
  • Finding alternative lending solutions
  • Requirements to obtain a bad credit business loan

And of course, we will cover the numerous benefits of a bad credit business loan for your organization. Read on to find out how intelligent financing is right around the corner.


Bad Credit Business Loans and Checking Your Personal Credit Score

One of the first steps in obtaining a bad credit business loan is to have an accurate sense of your credit health. You should check your personal credit score to see if it’s low enough to apply for bad credit business loans. The FICO score ranges from 300-669, with the higher end denoting better credit. 

If your score falls between 300-579, you may qualify for a loan with a higher interest rate than most other types of consumers. Lenders take on greater risk with bad or no credit borrowers, and will likely apply rates to match. Your best bet is to visit your state or federal agency where you can apply for more than one type of loan and work with a professional who can help figure out which type will be the best for your situation.

Options are waiting for you.


Improve Your Credit Score for Better Approval Odds on a Bad Credit Business Loan

You may have a low credit score, but that doesn’t mean you’re out of luck when it comes to getting a business loan. Working with lenders who focus on bad credit business loans can give you an edge. However, one of the first things you can do is to boost your current credit rating. 

If it’s just a few points that could make the difference, there are ways to boost your score in as little as a month. If you’ve got some more work to do before applying for a loan, then start by paying off any outstanding balances or debts. Timely repayments have a robust impact on credit scores. Moreover, making full use of your hard-earned dollars is a start to genuine financial fitness.


Use a Business Loan Broker

With a credit rating below 600, you may look to a business loan broker to find financing. In fact, In the US, the number of companies in the loan brokers industry increased by 6% annually on average between 2017 and 2022.

When lenders see you as risky and may not want to take the risk on you, a loan broker can help bridge the gap to a bad credit business loan. Using their network of lenders can help even if your application has been denied in other cases.

Creditors have built trust with these brokers that are essentially passed onto you to allow financing for that dream project or acquisition.


Get a Secured Bad Credit Business Loan

Secured business loans make use of collateral to lower the risk to the lender, giving the borrower the chance to receive loans with softer conditions and lower credit score criteria. A loan can be secured in several ways, including with property or a personal guarantee. 

With secured financing, the lender gets a sense of assurance in the form of property for their investment. For example, if you want to borrow $20,000 they will require some sort of asset as a guarantee of repayment. Typically, this security would be in the form of something like real estate (a house or an apartment building) or equipment that has value.


Finding an Alternative Lender

Finding an alternative lender with a bad credit business loan can be difficult, but it’s not impossible. You have to know what you’re looking for and where to look. Here are a few ways to find a bad credit business loan to fuel growth for your business!

1) Online Alternatives – Some small business banks offer online alternatives that allow potential borrowers without any banking experience or connections to get small-business loans in minutes without visiting their offices. 

2) Mobile Apps – One of the most common places people apply for loans is through their phone apps because they make lending quick and easy. Additionally, there are many different types of bad credit business loans, personal loans, and small business loans on these platforms. 

3) Build a relationship with a financial institution offering low-interest rates if you have less than perfect credit or limited assets.


What are the requirements for a small business owner to get a business loan with bad or no credit?

So what are the requirements for small business owners with bad credit to get approved for a loan? Generally, to be eligible for a bad credit business loan, you must have an annual income of at least $20,000 per year, though some lenders will allow even less.

In addition, an outstanding debt-to-income ratio of 40% or less is a requirement in most cases. You should also have liquid assets and useable collateral that is worth at least 50% of the amount you intend to borrow. Lenders reduce risk in financing when you provide the backing of your own assets. 

Registering your small business with Dun & Bradstreet may help increase your chances of being approved for a loan if your score is low.

With a bad credit business loan, it’s best to shop around for competitive rates and flexible repayment options. Most business loans require borrowers to be self-employed, but there are options available even if you work for someone else full-time. 

It may be possible to accept less money than you had originally anticipated if you are flexible about the amount you are seeking to secure. You might be able to acquire a reduced first cash payment from a lender who offers business loans for people with negative credit. You will be able to borrow more money when you pay off the lesser loan.

The Benefits of Getting a Bad Credit Business Loan

The first benefit is the ability to get approved for a loan when you have bad or no credit. A bad credit business loan can be the infusion of capital a business needs to get off the ground. In addition, growth and potential investment opportunities may be closer than they appear with adequate financing.

These loans are often quick to obtain because lenders don’t require the same level of documentation as traditional loans. In fact, your options are typically not limited to one lender as funding can come from multiple sources.

If you are planning on applying for a bad credit business loan you must do your research ahead of time. This includes having your financial documentation in order, building a relationship with multiple lenders, and preparing for follow-up questions about your business and plans for growth.

Stay connected with Small Business Bank to never miss out on all things small business financing! Professionals are standing by to help make your future success a reality today.