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Best Bad Credit Business Loans for 2019

Is it possible to get a business loan even if you have bad credit?

In the past… no. Banks once controlled small business financing and anything less than a 700 credit score just didn’t cut it.

But now? Fortunately, that answer is a resounding yes.

With the development of various alternative financing solutions thanks to the FinTech revolution, credit has taken a back seat for a more all-inclusive approval process.

Now, small business owners can get the funding they need to grow their business with less than perfect credit.

How alternative financing works

So, how can you be approved for a business loan with bad credit?

Through the advancement of financial technology and the understanding that running a business can leave your credit score in bad shape, a more comprehensive approval process has been developed.

Many great options for bad credit business loans are now available– options that weigh the strength of your business as a whole, from cash flow to your debt-service coverage ratio, instead of just your credit score and financial statements.

By balancing these additional factors, lenders can obtain a better overall view of your business’ health and offer you capital even without good credit, provided your business is stable and profitable.

Get the funds your business needs without good credit

Small business owners are often turned away by traditional lenders when they have a less than perfect credit history. You may have experienced this first-hand.

Sure, a bad credit score implies you haven’t managed your finances properly in the past.

However, it doesn’t tell the whole story and oftens lacks to reflect a proper business risk assessment.

At Excel, we realize that when starting a business sacrifices sometimes need to be made to pave the way for you future.

We believe there’s more to the story of your business. We also believe in your opportunity to grow your business to its full potential with access to capital when it matters most.

With options that require no personal guarantee or collateral as well as funding (and approval) in as little as 24 hours, Excel Capital can give your business the funds it needs to move your business forward, in good times and bad.

Click here and complete our short one-page application to discover your options and find out how much you can get approved for today.

Bad credit business loans: Everything you need to know

So, what are your options? And what should you know going into the process looking for a bad credit business loan?

Below, we’ll cover everything you need to know about bad credit business loans and get you on your way to obtaining the funds your business needs:

  1. Personal credit vs. business credit
  2. What kind of loan will your credit score get you?
  3. Types of bad credit business loans
  4. And how to get a small business loan with bad credit

What is bad credit?

First, what exactly is considered ‘bad credit’?

There are several credit scoring models, whether it be from VantageScore or FICO, however, the most widely accepted model is shown below:

FICO Scores

  • 800 to 850 is exceptional
  • 740 to 799 is very good
  • 670 to 739 is good
  • 580 to 669 is fair
  • 300 to 579 is generally the ‘bad credit’ range

And this basic FICO scoring model generally uses these parameters to generate your score:

  • 35% of your score: Payment history
  • 30% of your score: Your debt
  • 15% of your score: The age of your credit history
  • 10% of your score: Credit inquiries
  • 10% of your score: Types of credit

Keep in mind, as mentioned above, there is no one single accepted scoring model for all types of loans. Each type of loan uses a slightly different model. However, this is the most common.

Tip: Personal credit vs. Business credit

Bad Personal Credit vs Business Credit

It’s important to note that when we say credit score, we’re talking about your personal credit score, not your business credit.

That’s a really important distinction, partly because personal credit is much easier to fix than business credit.

It’s also important because a lot of business owners think their business credit is the main factor for consideration when applying for a loan.

In most cases, the only lenders that will look at your business credit are traditional lenders such as banks.

Alternative, or non-bank, lenders such as Bizfi and Paypal working capital focus on your personal credit score when evaluating business funding with bad credit, so that’s what we’re talking about here.

Action Step: Get your personal credit report

Before we get into what kind of loan your credit might be able to get you, it’s important to get your most up to date credit report.

If you haven’t checked your personal credit report in a while, don’t worry, it’s easier than ever to get your report for free (assuming you haven’t gotten it already this year).

Once a year, you can get your personal credit report from Annualcreditreport.com (technically, the only authorized website for free credit reports), so grab that now so you know the information you’re working with is current.

Why would we fund you if you have bad credit?

There are several reasons why we can fund you if you have bad credit.

However, the most important point is what we touched on above: there’s more to your business’ health then just your credit score and the items on your credit report.

Your credit report includes a series of snapshots. It could include accounts from several years ago.

Chances are, you’re not the same person– and your business isn’t in the same position– then when you missed those payments or defaulted on that loan.

Lenders will still take note of it. But again– it’s not the whole story.

Our process is different from traditional lenders. We take several factors into consideration that tell a more well-rounded story of the health of your business.

What is your cash flow like? How much debt do you have? What is the difference between the two? Are you on a growth trend or is your business cutting staff because the industry is being phased out?

There’s so much more to your business than just your credit score and it’s our goal to offer a fairer and more ‘complete’ system for loan approval than traditional lenders.

Types of bad credit business loans

business loans for bad credit

Below are several alternative financing options, all with their own specific benefits, and based on different financial needs.

No matter what stage you’re at in your business, there’s a vehicle that will help you get the funding your business needs.

Unsecured business loans

An unsecured business loan is a loan based primarily on your cash flow and gross sales, up to as much as $2,000,000.

An unsecured business loan does not require any form of hard collateral, making it a safe and effective option for virtually any business.

A lender may require you to offer a limited collateral as security if you can’t repay the loan. However, typically, this is only a percentage of future sales. That means if you go out of business, you’re not entitled to pay back the loan.

In addition, because they’re unsecured, interest rates tend to be higher.

Learn more about unsecured business loans.

Business line of credit

Similar to a credit card, a business line of credit is a revolving credit amount which you can use continuously as the need arises. This is a trade off for lower loan amounts and higher interest rates.

If you have high seasonality, making your cash needs much greater during one part of the year than the rest, a business line of credit could be ideal.

Business lines of credit don’t require collateral. However, due to that, your credit score generally needs to be on the high end of bad to fair (540+).

Learn more about business lines of credit.

Split funding

Split funding, also known as a merchant cash advance, remits (or deducts) a percentage of your daily credit card sales to repay the loan.

This makes them great for businesses whose cash flow fluctuates, making it difficult to make consistent, on-time monthly payments throughout the year.

When business is good a larger amount is deducted. However, when cash flow is down, that amount is smaller, helping your business adapt with your fluctuating cash flow.

Because of the nature of this type of loan, a consistent cash flow from credit card sales is required for approval.

Learn more about split funding.

Term loans

This includes both short-term and medium-term loans, each designed to fill either a short-term or medium-term business need.

Think of it as a quick infusion of cash for a specific purpose such as new equipment, hires, or extra material before a busy season.

These types of loans are ideal when you specific lump sum for a one-time purchase or cash boost.

Learn more about term loans.

How to get a small business loan with bad credit

So, now you know your options. But what will you need to apply– and get approved– for a bad credit business loan?

First, let’s look at what lenders typically look for in applicants so you can maximize your chances of being approved.

What do lenders look for?

What do lenders look for when funding bad credit business loans?

As far as your credit score, these are important things to make a note of:

  • Bankruptcies
  • Foreclosures
  • Tax liens

None of the above disqualify you. However, it’s important to keep in mind that if they were recently placed on your credit report, they will have an impact. So, you’ll want to make sure all your other ducks are in order as best as possible.

However, as we talked about earlier, alternative lenders look at more than just your credit score.

Here are a few more things which are important to keep in mind:

1. Annual revenue

One of the most important factors, annual revenue lets lenders know how your business is doing in the broadest sense.

Is revenue increasing each year? Is it down? This is also an important factor for deciding what size of loan you’re approved.

2. Current debt obligation

Do you already have a business loan? Are you currently paying it off? And is there collateral involved?

Most lenders don’t like to see that you already have a business loan with someone else.

This doesn’t just mean that it may be harder for you to pay them back. It also means that, in the case of defaulting on a loan and potential matters of collateral, they’ll be “second position”.

That means they will only be able to collect after the first lender does, which a lender does not like to see.

3. Cash flow

We covered annual revenue and profitability, however, cash flow tells lenders much more that neither revenue or profitability can.

Lenders want to see not only how well you manage the money that comes in, whether you properly handle your expenses but also how much spare cash you keep on you at any given time.

If something were to happen tomorrow and your cash flow dips, could you continue to pay your loan off? Lenders want to see that this is the case.

4. Profitability

Closely related to annual revenue, profitability is one of the best ways for telling how effectively you’ll be able to repay a loan.

While annual revenue is important, if you have a huge revenue but very little actual profit, your business isn’t actually doing as well as it looks.

Most Bad credit business loans under 100k do not require a profitability review. However, when the business loans get higher some institutions may request copies of your financial statements to review your bottom line.

What do I need to qualify for a bad credit business loan?

Business funding with bad credit qualifications

Now that you have a better idea of what lenders are looking for when you apply for a bad credit business loan of any kind, what do you need to qualify?

It all depends on the type of loan, so, ultimately, you’ll want to first figure out which loan type makes the most sense to you.

If you’re unsure, don’t worry. When you submit your information through our short online application, we guide you through the entire process.

However, still, it’s important to know in advance what you’re expected to have in place.

Generally, every one of the loan options we mentioned earlier require that you’ve been in business for at least six months to one year and are in good standing.

For most loan options, there is:

  • No minimum credit score
  • No collateral required, and
  • For unsecured business loans: you need only $10,000 in monthly gross revenue to apply.

In addition to the above, each loan type requires several documents which you’ll need to apply. Let’s talk about those now.

What documents do I need to apply?

Each loan program will be somewhat different, however, the majority of documents are generally the same across the board.

Here is a short list of documents which you may be required to provide to complete your application (Hint: they’re not required for submitting an online application, only afterward):

Documents needed for small business loans bad credit

Documents needed for approval:

  • Completed application
  • Copies of last 4 months of business bank statements
  • Copies of last 4 months of processing statements (if accepted at your business)
  • Drivers license
  • Voided business check

Documents that may be requested prior to funding (after your application has been submitted):

  • Proof of ownership
  • Profit & loss statement
  • Property lease agreement and landlord contact information
  • Personal and/or business tax returns
  • Business licenses
  • Debt schedule

Not all of these documents will be required for each program. However, it’s important to know in advance so that you can put your things in order; Especially if you’re looking to receive funds quickly.

How to improve your bad credit score to secure better offers

Qualifying for and obtaining a business loan is just the beginning.

Once you’ve obtained an alternative loan you should turn your focus to improving your business credit score for the future to obtain a better loan the next time around.

Having a bad credit score is never ideal as credit scores play a major role in your everyday life.

What are the benefits of no credit check business loans?

No credit check business loans are beneficial for businesses owners that are looking to keep their credit score in top shape while still obtaining working capital to help grow their business.  

Many unsecured business lenders will do a hard inquiry before extending an offer which can negatively impact your credit score, making it hard to keep a perfect credit score.

For that reason, it’s important to ask for a no credit check business loan when applying for business funding.

By obtaining small business loans with no credit check you can avoid business financing affecting other personal funding that is being worked such as:

  • A home mortgage
  • Car loan applications
  • Home equity lines 
  • or any other personal transactions that are not related to your business.

Many secured business loans have strict guidelines regarding your credit so obtaining a no credit check business loan keeps your traditional funding safely in play.

However, the best solution is to always maintain a good credit score so you can get the most bang for your buck.

Here’s how you can turn your bad credit score into an excellent credit score:

1. Pay your bills on time

The easiest (and likely best) way to improve your bad business credit score quickly is by paying your bills on time. That’s all there is to it.

Now that you have a loan you’re in a unique position to rack up a history of on-time payments and the credit score bump that happens over time from doing so. Both of these will play a big part in getting approved for a better business loan down the line.

Also, if you want to take it a step further and look really good to loan companies make payments in advance whenever possible.

2. Keep your credit lines open

A lot of business owners think canceling all of their credit cards is the best solution when they find themselves in a rut, however, this is one of the worst things you can do.

Closing your credit lines will cause your overall business credit lines to decrease both quickly and dramatically, negatively impacting your overall credit score.

Even if the balance is zero this helps poor credit get better and doesn’t have you pay an interest rate since your not using any of the lines of credit available to you.

Instead, pay off your balances steadily and consult a credit professional if you believe you need additional help.

3. Monitor your balances

Paying your monthly payment and other bills on time is great, but paying down your balances when you can to under 10% will increase your overall credit score tremendously.

So, make sure to monitor your balances and plan payments accordingly so that you stay below that as often as possible.

4. Watch your credit report

Lastly, one of the most important things you can do is monitor your credit report.

Look for errors, chargebacks, items that have been sent to collections, etc. and handle them as you see necessary.

Taking the extra time to make sure your report is accurate and up-to-date can go a long way.

And, with all of these points taken together, the next time you are looking for business funding with bad credit so you can get the best terms possible.

How to apply for a bad credit business loan

You’ve reviewed your options, put your things in order, and now you’re ready to apply.

Ultimately, you’re the best judge of what your business needs and when it needs it.

But if you know your business needs cash and not getting it will hold it back from growth– you need to do everything you can move the business forward.

We’ve made it simple and easy to get your business the funding it needs. Often, in as little as 48 hours.

Simply complete our one-page application by clicking here and we’ll get back to you with an approval decision in as little as 24 hours.

Don’t let bad credit hold your business back from getting the funding it needs to grow.

Click here to complete our short one-page application and see what you’re approved for today.