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Bad Credit? You Can Still Qualify for a Business Loan
Don't let a low credit score keep you from growing your business. Clarify Capital connects you with lenders who look beyond your FICO score, focusing on your revenue, cash flow, and business potential instead.
Minimum credit score: 550
Financing speed: As quickly as same day
Loan amounts: $10,000 to $5,000,000
No collateral required for select loan types
Our lending advisors compare options from our network of 75+ lenders to find competitive rates tailored to your business at no cost to you.
Even if you have bad credit, you can still qualify for a business loan. Maybe cash has been tight, you've had some major expenses, or high utilization knocked down your FICO score. Regardless of how you got there, you're not alone. Here, I'll walk you through the business loan options available with bad credit and what lenders may look for beyond your credit score.
The Best Business Loans for Low Credit Scores
These are financing options where qualifying tends to be more flexible and usually work best for companies with a low business credit score.
| Loan type | Rates/fees | Repayment terms | Best for |
|---|---|---|---|
| Short-term business loan | Can start as low as 6%, but typically 14% to 99%+ APR | Monthly payments, usually over a period of 6 to 36 months | Specific, lump-sum expenses you can pay off relatively quickly, like equipment or inventory, when you need fast funding |
| Business line of credit | Can start as low as 6%, but typically 3% to 60%+ APR | Revolving; only pay back what you use, similar to a business credit card | Managing cash flow gaps, covering short-term expenses, and having access to flexible working capital |
| Invoice factoring | Usually ~0.5% to 5% per 30 days (discount fee, not APR) | Repaid through your invoice; fees also deducted when your customer pays | B2B businesses waiting on unpaid invoices and needing immediate cash flow who are willing to offload money chasing |
| Equipment financing | Can start as low as 6%, but can be 2% to 40% APR | Monthly payments; terms typically 12 to 72 months (can extend longer for certain equipment types) | Purchasing or upgrading equipment with up to 100% financing, using the equipment as collateral |
| SBA loan (7(a), Express, Microloan) | Varies by program and loan size | Usually five to 25 years (up to 10 years for working capital, up to 25 years for real estate) | Established or growth-ready businesses seeking low-interest, long-term financing for expansion, real estate, refinancing, or major investments |
| Merchant cash advance (MCA) | Factor rates apply (typically 1.08% to 1.45%; varies by risk and sales volume) | Fixed percentage of daily or weekly sales (holdback) until the total repayment amount is met | Businesses with strong credit card sales needing fast, flexible funding with less emphasis on credit score |
Short-Term Business Loan
Short-term business loans are pretty much what they sound like. Lenders give them as a lump sum, and they are paid back with a set APR, or interest rate, over a relatively short period of time, usually anywhere from six to 36 months.
They're good for covering one-time, temporary expenses. They're usually a bit easier to qualify for than long-term loans, and funding turnaround time can also be quick. The payments can be larger, but the trade-off is that you pay it off faster.
Business Line of Credit
A business line of credit is similar to a credit card. It allows you to spend up to a certain amount of money on a revolving basis, and you only pay back and accrue interest on what you use in a given period. They usually have lower interest rates than regular credit cards, and using one can also help build up your personal credit score. The main caveat is that qualifying can still be challenging, especially for higher limits, and rates can increase quickly depending on usage.
Invoice Factoring
Invoice factoring is when a business sells its unpaid invoices to a factoring company. The factoring company gives you an up-front payment and takes over the legwork of collecting payments on future invoices in exchange for a cut of them.
This is a great option if you tend to have trouble with slow-paying clients and don't mind a third party intervening in the relationship. Invoice factoring can often be one of the easiest types of financing to get, even with a low credit score, because eligibility is based on the strength of your invoices rather than your personal ability to repay a loan.
Equipment Financing
Equipment financing is a funding option specifically for businesses that need to purchase new equipment, from machinery to tech and vehicles. It's great if you need to replace old assets or expand your operations, but you can't quite shoulder the huge up-front cost that often comes with. With an equipment loan, the equipment itself serves as collateral, so if you default on payments, the equipment can be seized. That reduces lenders' risk, making it a good option for lower-credit borrowers.
SBA Loans
SBA loans are designed for small businesses and are backed by the Small Business Administration (SBA), a government agency that aims to expand loan access for more small businesses. The SBA guarantees part of the loan, which allows lenders to offer lower interest rates and longer repayment periods.
Those benefits also mean they're harder to qualify for. SBA loans probably have the strictest underwriting standards of this list. Lenders look for solid financials and established business history, which often includes credit. I include them because they're often considered the benchmark for affordable business financing, even though they aren't realistic for every borrower.
Merchant Cash Advance
A merchant cash advance is a type of financing in which a business receives a lump sum up front in exchange for a portion of its future sales. After getting the cash advance, you repay a fixed percentage of your daily or weekly revenue (called a holdback) until the agreed repayment total is paid off.
The main caveat is that you pay more when sales are high (and less when they're slow). Merchant cash advances are the most flexible option for borrowers with bad credit; your eligibility is based primarily on your revenue consistency and sales volume, not credit score.
Common Uses for Bad Credit Business Loans
Here are some of the most common uses for a bad credit business loan.
| Use | Why it works |
|---|---|
| Covering slow periods | Helps with cash during revenue dips so you can keep up with ongoing expenses like rent, utilities, etc. |
| Real estate (short-term deals like fix-and-flip or bridge financing) | Can give you fast access to capital for time-sensitive deals when traditional lenders aren't an option |
| Inventory/supplies | You can stock up ahead of busy periods or meet demand during them without waiting for incoming cash from revenue |
| Equipment | Lets you buy or upgrade essential equipment without paying the full cost up front |
| Payroll or taxes | Helps you meet immediate obligations and/or avoid disruptions when cash is tight |
| Refinancing existing debt | You can consolidate or restructure payments to improve short-term cash flow (but it may increase the overall borrowing cost) |
