Half of all business owners don’t qualify for traditional business loans because they have bad credit scores, according to the Federal Reserve. Online lenders offer small business loans to borrowers with credit scores of 600 and lower, but these bad credit business loans carry high overall costs.
Top 5 Bad Credit Business Loans
Lender | Best For | Minimum Credit Score |
|---|---|---|
Best overall | 500 | |
Flexible repayment terms | 550 | |
Funding with repayments up to three years | 600 | |
B2B invoice factoring | 530 | |
Merchant cash advance financing | None |
How We Evaluated Business Loans for Bad Credit Borrowers
We objectively grade each lender based on 25 variables within five major criteria: lender minimum requirements, costs, the application process, terms, and funding speed. We placed additional emphasis on requirements over factors like funding speed to find the 100 lenders across these criteria that offer the most affordable business loans for borrowers with bad credit.
We evaluated each lender based on the following weighted criteria:
- Requirements (40/100): Minimum credit score, time in business, and annual revenue are all part of this category, ensuring that the top choices have the easiest-to-meet qualifications.
- Overall costs: (20/100): Fees, interest rates, and the resulting APR are all included in this metric to accurately measure the financial impact of the financing solution.
- Application process (20/100): The documentation and time investment required to complete a loan application.
- Terms (10/100): Repayment terms including the payment interval and length of repayment to ensure that small business owners can select an option that fits their plans and their budget.
- Funding Speed (10/100): The speed with which a lender provides a funding decision and can transfer money to a small business checking account, to ensure that funding is quick.
The five lenders that made our list include invoice factoring and merchant cash advance providers. Invoice factoring is financing based on invoices, and a merchant cash advance is financing based on credit card receivables. If this is new, don’t worry, each section contains additional information about the loan type, and we use equal criteria when comparing these loan products.
Fundbox: Best Bad Credit Business Line of Credit
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Maximum Loan Amount | $100,000 | Payment Frequency | Weekly |
Minimum Credit Score | 500 | Repayment Term | 24 weeks |
Starting APR | 10% | Funding Speed | Next day |
Fundbox offers a revolving line of credit borrowers can draw against without having to reapply. It has low overall requirements and a reasonable starting APR; however, borrowers with poor credit should expect higher rates. Fundbox offers next day funding but has short repayment terms compared to other providers on this list.
Fundbox Costs
Fundbox Line of Credit | |
|---|---|
Starting Interest Rate | 4.66% |
Expected APR | 10% to 79% |
Maintenance Fee | None |
Fundbox does not provide a range for its fees, stating only its lowest rates on its website. Based on the lowest possible APR of 10%, provided to us by Fundbox, the starting costs for a $10,000 Fundbox bad credit business loan is $466. Fundbox gives business owners the opportunity to repay the loan early and save some money.
Fundbox Terms
Fundbox Line of Credit | |
|---|---|
Credit Line | Up to $100,000 |
Repayment Term | 12 or 24 weeks |
Repayment Schedule | Weekly |
Collateral | Blanket UCC filing |
Personal Guarantee | Required |
Funding Speed | One business day |
Fundbox lines of credit have repayment terms of 12 or 24 weeks with weekly payments. Although Fundbox’s terms are shorter than other providers, it offers a line of credit that allows borrowers to draw on additional funds after repayment. This is important for poor credit borrowers because it reduces the number of hard credit checks and avoids needing to reapply for a loan.
Fundbox Qualifications
Fundbox Line of Credit | |
|---|---|
Minimum Credit Score | 500 |
Minimum Time in Business | Three months |
Minimum Annual Revenue | $50,000 |
Fundbox will perform a custom-built business health assessment to determine qualifications. This makes Fundbox one of the least restrictive online lenders, which already collectively have a 62% approval rate for employer businesses and 45% approval rate for solo businesses, according to a Consumer Financial Protection Bureau study.
LoanBuilder: Best Short-term Loan
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Maximum Loan Amount | $500,000 | Payment Frequency | Weekly |
Minimum Credit Score | 550 | Repayment Term | 52 weeks |
Starting APR | 12% | Funding Speed | Next day |
LoanBuilder is the best poor credit business loan for borrowers needing the flexibility of selecting 13- to 52-week terms. It is a more balanced loan than the one offered by Fundbox because it offers more funding and better terms, but has a higher minimum credit score requirement. Business owners can qualify and receive funding as soon as the next day after applying.
LoanBuilder Costs
LoanBuilder | |
|---|---|
Starting Interest Rate | 2.9% to 18.72% |
Expected APR | 12% to 136% |
Origination Fee | None |
LoanBuilder charges a fixed fee for its loans instead of interest over time, making it more important to select the right terms. Based on the fee applicants are offered, the overall cost of capital would be the fee multiplied by the loan amount. For example, a $10,000 loan with a 25% fee would cost roughly $2,500 in interest.
LoanBuilder Terms
LoanBuilder | |
|---|---|
Loan Amount | $5,000 to $500,000 |
Repayment Term | 13 to 52 weeks |
Repayment Schedule | Weekly |
Collateral | Blanket UCC filing |
Personal Guarantee | Required |
Funding Speed | One business day |
In our evaluation, LoanBuilder received high marks for the flexibility it offers when selecting a loan. Once approved, borrowers can select a loan amount that will have a corresponding term and interest rate that fits their business needs. However, borrowers must make weekly payments on the loan.
LoanBuilder Qualifications
LoanBuilder | |
|---|---|
Minimum Credit Score | 550 |
Minimum Time in Business | Nine months |
Minimum Annual Revenue | $42,000 |
The annual revenue requirement for LoanBuilder was the lowest we evaluated for our list of the best bad credit business loans. Additionally, the minimum time in the business—of at least nine months—was roughly average compared to other options we evaluated. This gives smaller and newer businesses an opportunity to qualify for a customizable funding option.
OnDeck: Best Loan With Long Repayment Terms
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Maximum Loan Amount | $500,000 | Payment Frequency | Weekly |
Minimum Credit Score | 600 | Repayment Term | 36 months |
Starting APR | 10% | Funding Speed | Next day |
OnDeck offers business loans to small businesses with less than perfect credit. While it has the highest requirements we evaluated, it offers a long repayment term and a substantial amount of funding. Small business owners with substantial time in business and strong revenues should consider applying with OnDeck.
OnDeck Costs
OnDeck Business Loan | |
|---|---|
Starting Interest Rate | 9% |
Estimated APR | 10% to 100% |
Origination Fee | Up to 5% |
OnDeck is transparent with its rates, offering information on the weighted average rate for borrowers, which was 49% in the quarter ending December 2019. Borrowers don’t have the option to save money if they repay early; however, OnDeck offers the longest loan terms among the bad credit business loans for up to three years.
OnDeck Terms
OnDeck Business Loan | |
|---|---|
Loan Amount | $5,000 to $250,000 |
Repayment Term | 12 months |
Repayment Schedule | Daily or weekly |
Collateral | Blanket UCC filing |
Personal Guarantee | Required |
Funding Speed | One business day |
The quick funding from OnDeck is like the other loans we evaluated in our search for the best business loans for bad credit borrowers. Most of the loan options also have comparable collateral and personal guarantee requirements to OnDeck, which allows it to offer less restrictive qualifications than traditional lenders.
OnDeck Qualifications
OnDeck Business Loan | |
|---|---|
Minimum Credit Score | 600 |
Minimum Time in Business | One year |
Minimum Annual Revenue | $100,000 |
OnDeck qualifications are stricter than Fundbox’s, but its credit score requirement—of at least 600—makes it available to poor credit borrowers. If an applicant has a high enough credit score, has been in business for at least one year, and has at least $100,000 in annual revenues, then they meet OnDeck’s primary minimum qualifications for funding.
BlueVine: Best Online Invoice Factoring Service
| |||
Maximum Loan Amount | $5 million | Payment Frequency | None |
Minimum Credit Score | 530 | Repayment Term | 90 days |
Starting APR | 13% | Funding Speed | One day |
BlueVine is an option for businesses with outstanding business-to-business (B2B) or business-to-government (B2G) invoices over $5,000 due in the next 90 days. Unlike most invoice factoring companies, funding only takes one day and there are no required factoring contracts. Small business owners with a cash flow shortage due to outstanding invoices should consider applying with BlueVine.
BlueVine Costs
BlueVine Invoice Factoring | |
|---|---|
Discount Rate | 0.25% to 1.35% per week |
Expected APR | 13% to 70% |
Origination Fee | None |
BlueVine was transparent about its fees when we called, reporting its highest rates to be 1.35% per week on invoice factoring and providing us with an APR range of 13% to 70%. Factoring $10,000 in invoices will cost from $320 to $1,700 over the course of 90 days. Compared to OnDeck, BlueVine offers shorter terms but allows much higher borrowing limits.
BlueVine Terms
BlueVine Invoice Factoring | |
|---|---|
Funding Amount | $5,000 to $5 million |
Advance Rate | 85% to 90% |
Repayment Term | Paid with invoice collection |
Personal Guarantee | Required |
Funding Speed | One business day |
Compared to other loans we evaluated, the loan amounts for BlueVine stood out. One downside is the B2B and B2G invoicing requirement, making the loan inaccessible for some small businesses. However, for qualified businesses with a high volume of invoices, the $5,000,000 maximum is the highest loan amount on our list.
BlueVine Qualifications
BlueVine Invoice Factoring | |
|---|---|
Minimum Credit Score | 530 |
Minimum Time in Business | Three months |
Minimum Annual Revenue | $100,000 |
The annual revenue requirements to qualify for BlueVine invoice factoring are tied for highest on our list with OnDeck. However, in our evaluation, the relatively short amount of time in business and low credit requirements make BlueVine an option for newer businesses with numerous invoices needing financing.
National Funding: Best Merchant Cash Advance Solution
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Maximum Loan Amount | $250,000 | Payment Frequency | Daily |
Minimum Credit Score | None | Repayment Term | 18 months |
Starting APR | 30% | Funding Speed | Two days |
National Funding‘s merchant cash advance (MCA) is a solution for businesses with poor credit that accept credit cards and need financing up to $250,000. Compared to the other options we evaluated, an MCA is an expensive (30% to 150% APR) funding source and should only be used as a last resort. In fact, it’s only on our list to represent an alternative with no minimum credit score.
National Funding Costs
National Funding Merchant Cash Advance | |
|---|---|
Factor Rate | 1.1 to 1.6 |
Estimated APR | 30% to 150% |
Origination Fee | None |
National Funding merchant cash advances are designed for high-risk borrowers unable to get access to credit anywhere else. For a one-year loan term with National Funding, borrowers can expect to pay between $3,000 and $15,000 in interest for a $10,000 loan, based on the APR range we calculated. This makes a merchant cash advance an expensive option, and it should only be considered after the business has exhausted all other funding sources.
National Funding Terms
National Funding Merchant Cash Advance | |
|---|---|
Loan Amount | Up to $250,000 |
Repayment Terms | Up to 18 months |
Payment Schedule | Daily |
Collateral | Blanket UCC filing |
Personal Guarantee | Required |
Funding Speed | One to three business days |
With National Funding merchant cash advances, terms are customized based on the needs of each business. Advances and ultimate repayment will be based on the level and type of credit card payments a business accepts. Most borrowers will be required to make daily payments, based on a percentage of their daily credit card settlement.
National Funding Qualifications
National Funding Merchant Cash Advance | |
|---|---|
Minimum Personal Credit Score | None |
Minimum Time in Business | One year |
Minimum Monthly Credit Card Receivables | $3,000 |
Qualifying for National Funding is easier than most of the other lenders we checked, requiring no minimum credit score and only one year of operations. According to an FDIC survey of major banks, 92% of traditional lenders consider personal credit score as the most important factor for approval, which makes National Funding an alternative. However, borrowers must have at least $3,000 per month in credit card sales for this to be an option.
Bottom Line
Business owners with poor credit shouldn’t be discouraged if they are rejected for a traditional bank loan because there are many options worth considering. Depending on the personal and business situation of a borrower, different types of financing and lenders may be a better match.
