10 Best Startup Loans for Business Owners with Bad Credit

Getting approved for a business loan can feel like a challenge at the best of times. And when you’ve got a low credit score and a relatively new startup? It can feel impossible. Plenty of lenders won’t even consider you.

Some lenders will, though―and we’ve rounded up the best of those. The lenders on this list will consider businesses that have been around for a year or less along with credit scores in the “poor” range (less than a 580 FICO score). We’ll tell you a little about each lender so you can find the best fit for your startup business.

Let’s find you a loan.

Lendio: Best overall

Unlike every other company on this list, Lendio is not technically a lender. It’s a lending marketplace.

So when you submit a loan application, Lendio shops around for you to find loan offers. Then it lets you compare your offers and decide which (if any) application you want to move forward with.

Lendio offers a wide range of both lenders and financing types. We can’t promise that all those lenders and loan options will work for startups with bad credit (some definitely won’t), but Lendio has quite a few options that fit the bill.

In fact, you can get matched with many of the lenders reviewed below―which is why we think Lendio is the place to apply with. (Note, though, that matchmaking takes time, so you may get funding faster by applying directly with lenders.)

Put simply, Lendio’s loan matchmaking can help you get the best possible loan for your specific borrower qualifications. That makes it our favorite source for bad-credit startup loans.

BlueVine: Best for invoice financing

BlueVine has a handful of business financing products, but we want to talk about its invoice factoring.

As you may know, invoice factoring lets you get money in exchange for unpaid invoices. When you submit an invoice for factoring, the invoice factoring company gives you a percentage of the invoice’s value. After your customer pays their invoice, the company gives you the remaining invoice value (taking some money for fees, of course).

Plenty of companies offer invoice factoring, but BlueVine does it best. It has low borrower requirements that make it perfect for startups and business owners with bad credit. Plus, it has competitive rates, and its funding amounts go quite high (depending on your qualifications).

So if you invoice your customers, BlueVine’s invoice factoring can get you the working capital you need.

Fundbox: Lowest credit requirement

Fundbox has one big advantage: really low borrower requirements.

You can apply for a Fundbox line of credit after just three months in business. It has the lowest credit requirements of any lender on this list too (excluding the ones that don’t check credit). Throw in a pretty competitive revenue requirement, and you’ve got yourself a surprisingly accessible line of credit.

Now, meeting those bare minimum requirements doesn’t guarantee you’ll get approved. And if you do qualify for a Fundbox line of credit, you should expect a high interest rate and short repayment term on the money you borrow.

Even with those drawbacks, Fundbox’s low credit score requirement (and other borrower qualifications) mean it might fund you when other lenders won’t.

Kabbage: Most convenient

Kabbage offers a line of credit―and an incredible amount of convenience.

It all starts with the loan application. You answer a few questions and then connect Kabbage with your business bank account. It analyzes your finances, and then automatically makes a decision about your application. (Fundbox does this too, by the way.) That means you can get approved before you get back from your coffee break.

The convenience continues with the funding process. See, Kabbage lets you choose how you get your money. You can get a PayPal transfer (to get your money in minutes), a deposit in your bank account (perfect for making online payments), or a physical card (that you can use like a debit card). And you can get all of that even if you have a startup and a lower credit score―though you’ll pay for it with high fees.

All the same, if you want the most convenient business financing around, you want Kabbage.

Accion: Best for unique businesses

While many lenders care only about hard numbers, Accion also cares about your story―which can make it great for unique businesses.

Accion has a long, involved loan application. While lenders like Fundbox and Kabbage have moved to automated approval processes, Accion actually takes the time to talk with you and ask you about your personal history and your business. That’s because Accion wants to help fund business owners who may not qualify for business funding elsewhere. So it will consider your story and your skills―making it ideal for businesses that don’t quite fit the usual mold.

To be clear, Accion does care (at least a little) about numbers. It will look at your credit score, though it accepts poor scores. Accion will also consider your revenue and time in business, but it doesn’t have minimum requirements for either of those. In other words, your startup business could very well qualify for an Accion loan, despite a low credit score.

Accion may not have a fast loan application, but if you’ve got a story to tell, its personalized touch could make it the right lender for you.

Honorable Mentions

Kiva: Best for microloans

Kiva offers very small business loans, with a maximum loan size of $10,000. But if that works for you, you can get a microloan with absolutely no interest and no fees.

Plus, Kiva doesn’t care about your credit score or how long your startup has been around. It uses a (long) crowdfunding process, so you need a good pitch more than you need a good credit score.

Sure, the small loans and long funding process mean Kiva won’t work for all businesses―but the low requirements and cheap funding make it worth looking at.

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Lendr: Best for merchant cash advances

You can get either invoice factoring or a merchant cash advance (MCA) from Lendr.

To be honest, we prefer BlueVine for invoice factoring (it has lower borrower requirements), and we don’t like merchant cash advances much (they come with a confusing fee structure and high rates). But Lendr has better reviews and more transparency than other MCA companies do.

In other words, think carefully before taking out a merchant cash advance. If you decide you want one, though, Lendr’s our favorite source.

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PayPal Working Capital: Best for PayPal users

As the name suggests, PayPal Working Capital is exclusively for businesses that use PayPal to process payments.

In fact, your “creditworthiness” mostly depends on the volume of PayPal sales you have. PayPal doesn’t care about your credit, and you need to have used PayPal for just three months to qualify. If you get approved, PayPal automatically takes a percentage of your PayPal sales until you’ve repaid the loan.

We don’t think you should start using PayPal just to get one of these loans. But if you already take payments with PayPal, you might like this convenient option.

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Square Capital: Best for Square users

Square Capital works just like PayPal Working Capital, but for Square customers. So your eligibility is based on your Square sales volume―not your credit score or business age.

And if you get a loan, Square will take payments as an automatic percentage of your Square credit card sales. The rates aren’t great, but the convenience sure is.

So again, don’t sign up for Square because you want a Square Capital loan. If you use Square anyway, though, its loan could work for you.

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Stripe Capital: Best for Stripe users

Stripe Capital rounds out the payment-processor trifecta. Like PayPal Working Capital and Square, Stripe Capital only lends to Stripe users―and it makes decisions based on your Stripe sales instead of your credit score or other factors.

Stripe keeps its loan details pretty hush-hush though, so make sure you understand what you’re agreeing to before you take out a loan.
While Stripe Capital will never be our first pick for most businesses, it offers accessible funding for Stripe customers.

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How to improve your credit score

We hope you’re able to get a business loan from one of the lenders above. But we also want you to qualify for better loans and better rates in the future. And if you want to do that, you should start working on your personal credit score now.

Some simple financial practices can make a big difference.

For example, the most obvious way to help your credit score is to simply pay your bills on time. So make timely payments on your business loan and any other debts you have.
If possible, try to lower your credit utilization ratio―a fancy way of comparing the amount you borrow to your total credit limit. So if you’ve got a $10,000 limit on a credit card, try to keep your balance well below that limit (like $1,000).

And finally, simply wait a while. The length of your credit history can make a big difference. So the longer you have accounts open (and the farther in the past late payments get), the better your credit score should be.

Don’t qualify for a business loan? Get a personal loan instead.

Business loan alternatives

If none of the loans above will work for you, you can always try funding your business another way.

Crowdfunding

With crowdfunding for startups, your credit score doesn’t matter at all―and neither does the age of your startup business. All that matters is that you have a compelling pitch that makes people want to pledge money.

Investors

If you’re willing to give up a little equity, you can also consider finding investors. We can’t promise that investors won’t care about your credit score or time in business―some definitely will―but they may be willing to overlook those factors if you have a solid business and a great plan.

To get the big bucks, you’ll want to seek out angel investors or venture capitalists. But if you don’t need a ton of money, you might want to ask around your social circle.

You just might find a family member or friend who’s willing to invest in your startup.

Grants

Finally, you can try to apply for grants. Grants give you free money for your business, but they’re often very competitive, and the amounts can be quite small sometimes.

To up your odds of winning a grant, look for grants with niche application requirements. For example, you’ll likely have less competition if you apply for small-business grants for women instead of general business grants. And you’ll have even less competition if you apply for a business grant for women in Omaha, Nebraska.

Bad-credit startup loan FAQ

How can I get a startup loan with bad credit?

Getting startup financing with bad credit will likely be a challenge, since credit score and business age are two of the biggest factors lenders look at. So if you want to improve your chances of getting approved, you need to make sure you have an otherwise strong application.

For example, if your business has really high annual revenue (good job!) then you’re much more likely to get approved even with a bad credit score. Likewise, if you can get a cosigner who has strong credit, you can increase your chances of getting a loan.

You can also improve your odds by going with the right lender. You’ll have more luck with an alternative lender (a.k.a. an online lender) than a traditional lender (a bank or credit union). Alternative lenders tend to have lower borrower requirements than traditional lenders do.

Can I get a business loan with a 500 credit score?

It is possible to get a business loan with a personal credit score of 500, but you’ll have higher interest and fees than you would with a better credit score. And keep in mind, only a handful of lenders will consider your application.

Of the lenders reviewed above, Fundbox accepts a minimum credit score of 500, while Kiva, PayPal Working Capital, Square Capital, and Stripe Capital don’t even do a credit check. So if you’ve got a 500 credit score, those lenders will be your best bets.

Can you get an SBA loan with bad credit?

Unfortunately, no, you can’t get an SBA loan if you have poor credit. They generally require a good credit score. Take SBA 7(a) loans, for example. You need a 680 credit score (a good FICO score) to qualify.

Some SBA loans, like SBA microloans, may accept a lower credit score. But even these usually require a score in the fair range―not one considered “poor” on the FICO scale.

The Takeaway

We won’t lie: you might have a hard time getting a startup business loan when you have bad credit. But with the loan providers above, you’ll at least have a chance.

Their lower borrower requirements may help you get money, even when you can’t qualify for a traditional bank loan.

They may not be the best loans with the lowest rates, but they can give you the cash flow they need―at least while you’re improving your score and building your business.

You know about your personal credit score—but what about your business credit score? Learn more about how to build business credit (and why it matters).

Disclaimer
At Business.org, our research is meant to offer general product and service recommendations. We don’t guarantee that our suggestions will work best for each individual or business, so consider your unique needs when choosing products and services.