Best small-business loans for bad credit — practical options, plus how to get approved
If your personal or business credit score is shaky, you’re not out of options. Lenders look at many things — time in business, cash flow, revenue, collateral and payment history — so “bad credit” doesn’t automatically mean “no funding.” Below I run through the best funding paths for small businesses with poor credit, who they suit, pros/cons, and concrete steps to improve your chances.
1) SBA microloans and community lenders (CDFIs) — best for affordable, mission-driven capital
The SBA’s microloan program channels funds through nonprofit intermediary lenders (often called community development financial institutions or CDFIs). Microloans go up to $50,000 (average around $13,000) and intermediaries often provide coaching as well as more flexible underwriting than a traditional bank. Because these lenders focus on small-dollar lending and community impact, they’re often willing to work with imperfect credit histories. Small Business Administration
Pros: lower rates than many online alternatives; technical assistance; community focus.
Cons: slower (application + underwriting); paperwork; smaller amounts.
Who should apply: new businesses and micro-enterprises that need a few thousand to tens of thousands and want reasonable rates and support.
2) Crowdfunded microloans (Kiva) — no/minimal credit requirements, 0% interest option
Kiva allows small business borrowers in the U.S. to crowdfund microloans. Kiva markets 0% interest loans (and typically no fees) and doesn’t require a minimum credit score; approval depends more on the business plan, eligibility and your ability to attract lenders. Kiva can be especially good if you can mobilize a lending circle (friends, customers, community) or tell a compelling story. Kiva
Pros: zero interest possible; no collateral; accessible for very low credit.
Cons: amounts are small; you must campaign to attract lenders; timing can be slower.
Who should apply: sole proprietors, creative entrepreneurs, community businesses that can mobilize social support.
3) Merchant cash advances & platform-based capital (PayPal, Square) — fast, credit-score-light
If you process card payments through PayPal, Square or another processor, you may qualify for merchant cash advances or working-capital loans whose eligibility is based on sales volume rather than FICO. These products can be fast and don’t hinge on strong credit — the provider uses your payment processing history and daily sales to set advance amounts and repayment. PayPal Working Capital, for example, primarily uses PayPal sales history to determine eligibility. PayPal
Pros: very fast funding; approval based on sales rather than credit.
Cons: effective APRs can be high; repayment tied to a percentage of daily sales (affects cash flow).
Who should apply: retail/service businesses with steady card sales that need short-term cash quickly.
4) Online lenders that consider cash flow (BlueVine, others) — flexible but pricier
Some online lenders emphasize revenue, bank deposits and cash flow over FICO. For lines of credit or invoice financing, BlueVine and similar fintechs can be more flexible than banks and may approve applicants with below-perfect credit depending on revenue and business history. Compare rates and terms carefully — online underwriting is fast, but pricing varies. Bluevine
Pros: quick decisions, lines of credit for cash-flow management, invoice factoring available.
Cons: interest and fees can be higher; personal guarantee often required.
Who should apply: businesses with decent revenue but poor credit, especially those needing working capital.
5) Short-term / alternative lenders (OnDeck and peers) — possible but watch credit thresholds
Many direct online term-loan lenders have minimum credit-score requirements (OnDeck, for instance, lists a typical minimum around the mid-600s), so they are not a good fit for very low scores — but they’re useful benchmarks for businesses that are improving credit and revenue. If you’re just below a lender’s published minimum, you might still qualify if revenue and banking history are strong. OnDeck
Pros: very fast funding and transparent online process.
Cons: often higher rates; minimum credit requirements may be restrictive.
Who should apply: businesses whose credit is improving or that meet revenue thresholds.
6) Invoice factoring, equipment financing & co-signers — niche solutions
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Invoice factoring: sell unpaid invoices to get immediate cash — credit of your customers usually matters more than yours. Good when you have strong B2B receivables.
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Equipment financing: lenders often use the equipment itself as collateral; some accept lower credit scores because the asset secures the loan.
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Co-signer or guarantor: a partner with strong credit can dramatically improve approval odds (but transfers liability).
Pros: targeted to specific needs; can sidestep bad credit.
Cons: fees, possible loss of margin or control; co-signers take on risk.
How to choose — short checklist
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Match the product to the problem. Need $5k for inventory? Consider microloans, Kiva or merchant capital. Need ongoing cash flow? Look at lines of credit or invoice factoring.
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Compare total cost. APRs, factor rates, and origination fees — not just advertised rates.
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Check speed vs. cost tradeoff. Fast = often more expensive.
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Read repayment terms carefully. Daily percentage remittances (merchant advances) can squeeze cash flow.
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Ask about personal guarantees and reporting. Some lenders report to personal credit bureaus.
Tips to improve approval odds (even with bad credit)
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Document consistent revenue — bank statements and processor history matter.
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Organize invoices and contracts if you’ll apply for factoring.
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Prepare a concise business plan and cash-flow projection showing how you’ll repay.
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Offer collateral or accept equipment financing to reduce risk.
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Try CDFIs and microlenders first — they’re mission-oriented and often provide technical help.
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Fix quick credit errors: pull your reports, dispute mistakes, and focus on current on-time payments.
Bottom line (quick recommendation)
If your credit is poor, start with SBA microloans and local CDFIs for affordable small dollars and support, Kiva for 0% microloans if you can run a lending campaign, and processor-based capital (PayPal/Square) or revenue-based fintechs for fast working capital tied to sales. Use invoice factoring or equipment loans for asset- or receivable-backed funding, and reserve high-cost merchant advances only for urgent short-term needs. OnDeck