How to Get a Small Business Loan With Bad Credit

A low credit score doesn’t close the lending market. It closes one tier of it, the cheap tier, and it changes the order in which you should do things. Owners who don’t know that apply to their bank first, collect a denial and a hard inquiry, then arrive at the lenders who would have approved them with a slightly worse file than they started with.

Getting a small business loan with bad credit is less about finding a lender willing to overlook your score and more about building a file where the score isn’t the most important thing in it. That is a strategy, and it has a sequence.

The Bottom Line

• “Bad credit” generally means a FICO below about 600. Some lenders approve business loans down to 500, and a few asset-backed products barely weigh the score at all.
• Fix the two things you can fix in 30 days, reporting errors and utilization, before you apply. They move a score faster than anything else.
• Lead with what’s strong. Steady deposits, long-running customer accounts and hard collateral substitute for a score; a well-ordered file is how an underwriter sees them.
• Choose the product before the lender. Invoice factoring, equipment financing, revenue-based financing and microloans all approve below 600 for different reasons.

What counts as bad credit for a business loan?

Roughly a FICO below 600. The term usually refers to a score in the 300 to 599 band (Credibly, retrieved September 2026), and lenders read it in tiers rather than as a line:

• 670 and above opens bank and credit union pricing. Bank of America states a 700 minimum and Wells Fargo 680 (NerdWallet, retrieved September 2026).
• 650 to 670 still reaches SBA Express and many online lenders at reasonable rates.
• 575 to 650 is online lender and SBA microloan territory. Fora Financial lends to 570; SBA microloans have been available around 575 for businesses with strong revenue (NerdWallet; Bay Street Lending, retrieved September 2026).
• Around 500 to 575 is where asset-backed and revenue-backed products live. Invoice factoring, equipment financing, revenue-based financing and microloans commonly accept personal FICO scores as low as 500 (Bankrate, retrieved September 2026).

Notice that the products in the bottom tier aren’t just more expensive versions of a bank loan. They’re structurally different. They price off an invoice, a machine or a deposit history instead of your credit report. That’s the opening.

What to fix on your credit file before you apply

Two things move a score inside a month, and both are worth doing before any application.

Dispute reporting errors

Pull all three bureau reports and read them line by line. Accounts that aren’t yours, balances already paid, and duplicate collections are common, and removing one can shift a score by a meaningful margin. This is free and it’s the highest-return hour you’ll spend.

Pay down revolving utilization

Credit utilization is a large share of a FICO score and it updates monthly, unlike payment history. Getting card balances under 30% of their limits, ideally under 10%, can lift a score within one reporting cycle. If cash is tight, paying down one card to near zero often helps more than spreading the same money across three.

Two more take longer, and both should start now: separate business and personal banking if you haven’t (underwriters discount statements with grocery charges in them), and stop applying for credit. Each hard inquiry costs a few points, and a cluster of them reads as distress.

What not to do: pay a credit repair firm to promise a score jump, or open new accounts to “build history” in the month before applying. Both usually leave you worse off than the disputes you could have filed yourself.

Which small business loans approve bad credit

Four products approve below 600, for four different reasons. Pick by whichever of your strengths is strongest.

Invoice factoring, underwritten on your customers

You sell unpaid B2B invoices to a factor at a discount, typically 1% to 5% per 30 days (eCapital, retrieved September 2026). Because the factor collects from your customer, your credit matters far less than theirs. If you deliver wholesale to grocers, restaurants or corporate catering accounts on Net-30, this is the best-fit product in the list, because the money already exists and you’re buying it forward rather than borrowing against a promise.

Equipment financing, underwritten on the asset

The machine secures the loan, so the lender’s downside is covered by something it can repossess. A cooler, an oven, a display case or a packing line can often be financed at rates that have nothing to do with your score. The lease-versus-loan tradeoff and the tax timing are covered in equipment funding for coolers, ovens and packing lines.

Revenue-based financing, underwritten on deposits

Eligibility is built primarily around revenue and bank deposits rather than your credit score, which is why some providers accept scores in the low 500s (Bankrate, retrieved September 2026). Consistent deposits matter more than large ones.

SBA microloans, underwritten by a mission lender

Capped at $50,000 and issued through intermediary nonprofit lenders, microloans come with the most flexible credit standards in the SBA’s programs and often with advisory support attached (U.S. Small Business Administration, retrieved September 2026). Slow, but the cheapest realistic option in this tier.

One product deserves a warning rather than a recommendation. A merchant cash advance is the fastest and most accessible funding for poor credit, and it’s also the most expensive thing available. Factor rates of 1.1 to 1.5 translate to effective APRs commonly between 40% and 350% (Wealthvieu, retrieved September 2026). Repaying early generally saves nothing, because the total owed is fixed. Use it for genuine emergencies, and read what these products actually cost before you sign.

For the full field of products including the ones your score currently rules out, the types of small business loans lays them side by side.

How to present a file that gets funded below 600

An underwriter looking at a 560 score is asking one question: what else is here? Your job is to answer it before they have to ask. Four things carry weight.

Deposit consistency

Six months of bank statements showing steady, predictable deposits does more for a sub-600 application than almost anything else. If your business is seasonal, include the prior twelve months so the slow stretch reads as a pattern rather than a decline.

Customer concentration and tenure

Named accounts you’ve served for years are evidence of durability. A one-page list of your main wholesale accounts with the length of each relationship is unusual to include, and it lands well, particularly for factoring.

Collateral, named specifically

“We have equipment” is not useful. A short schedule of item, age, purchase price and estimated current value is. Offering something valuable like equipment measurably improves approval odds when credit is weak (The Hartford, retrieved September 2026).

A written explanation of the credit event

If the damage came from a specific cause, such as a medical year, a failed partnership or a pandemic-era stretch, say so in one paragraph, with the date and what changed afterward. Underwriters distinguish between a single bad period and a pattern, but only when you give them the means to.

Also expect a personal guarantee. Lenders typically place more emphasis on the personal credit score of the owner or whoever is personally guaranteeing the loan (Credibly, retrieved September 2026), and with weak credit a guarantee is usually non-negotiable. Know that it puts your personal assets behind the debt before you sign.

The right order to apply in when your credit is weak

Sequence matters more here than it does with good credit, because every misfire costs you points.

1. Fix the reports and utilization first. Give it one reporting cycle. A jump from 590 to 620 can change which tier you’re in.
2. Prequalify on soft checks only. Most lenders will give an indicative offer without a hard pull. Gather three or four before any formal application.
3. Start with asset-backed products, not general loans. If you have invoices or equipment to finance, apply there first. Approval is likelier and the pricing is better than an unsecured loan at the same score.
4. Then apply formally to one or two best fits. Not five. Clustered hard inquiries lower a score you’re already short on.
5. Skip the bank until something changes. With a sub-650 score, a bank application is a near-certain denial and a hard pull for nothing. Once you’re above 670 with two years in business, the whole cheaper tier opens and the standard application sequence applies.

What bad credit costs you, in dollars

Name the premium, because it changes what’s worth borrowing for. Where a bank might price a term loan in the high single digits, online term loans run from 14% up to 99% APR, and the asset-backed products land in between (NerdWallet, retrieved September 2026).

On $50,000 over two years, the difference between a 9% bank loan and a 35% online loan is many thousands of dollars, often more than the margin on the work the loan was meant to fund. Which leads to the most useful question to ask before borrowing at this tier: is there a version of this that doesn’t need a loan?

Sometimes there is. A common example is delivery capacity. Owners finance a second van and a driver to cover growing order volume, taking on a multi-year obligation priced at a bad-credit rate. Metrobi provides multi-stop route optimization and lets food, floral, catering and wholesale businesses work with the same drivers over time across major US cities, which turns that fixed cost into a variable one with no borrowing attached. When credit is expensive, avoiding the loan is worth more than negotiating it.

Frequently asked questions

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

Often yes, but not a conventional term loan. At 500, the realistic options are invoice factoring, equipment financing, revenue-based financing and some microloans, all of which underwrite something other than your credit report. Expect to show consistent revenue or offer collateral, and expect to pay more than a prime borrower.

Will applying for a business loan hurt my credit score?

A formal application usually involves a hard inquiry, which costs a few points and compounds if you submit several in a short window. Prequalification generally uses a soft check and costs nothing. Shop on soft checks, then apply formally only to your best one or two matches.

Does the business credit score matter or just personal?

Both, with personal weighted more heavily for small businesses. Lenders typically emphasize the owner’s personal score, or that of whoever signs the personal guarantee, though business credit can factor in. For a young company, personal credit is usually all there is.

How fast can I improve my credit enough to qualify?

Disputing report errors and cutting revolving utilization can move a score within one monthly reporting cycle, sometimes substantially. Payment history repairs take far longer, since missed payments age out over years. If you need money in under 60 days, plan around your current score rather than a future one.

Is a merchant cash advance a bad idea with bad credit?

It’s the most accessible option and the most expensive, with effective APRs commonly in the 40% to 350% range. It’s defensible when a short, specific gap will be closed by it, such as covering payroll before a large invoice clears. It’s a serious problem when it becomes recurring, because the daily remittance takes cash out precisely when you’d be rebuilding.

Where to start this week

Pull your three credit reports and dispute what’s wrong. Pay down whichever card is closest to its limit. Then decide which of your strengths is the strongest one, whether that’s invoices, equipment or deposit history, and apply to the product built around that strength rather than to a general-purpose loan that will judge you on the number you’re trying to work around.

A 560 score with six months of steady deposits and a named collateral schedule gets funded more often than a 620 with none of it.