How to Get a Small Business Loan With Bad Credit

How to Get a Small Business Loan With Bad Credit


Here are some alternative loan sources for business owners with less than stellar credit scores


The fact remains that it’s harder for smaller businesses—even those with stellar credit ratings—to get traditional bank loans than it is for larger businesses. Over 63% of business owners attempting to find funding say they most often targeted banks. The success among these respondents of actually getting a small business loan was a low 27%, reports SBA.

Unfortunately, bad credit credit—which is defined by FICO as a score of 300 to 629—currently plagues a large percentage of small business owners, as a result of the financial crisis several years back. One way entrepreneurs can overcome the stigma of poor credit is to apply for revenue-based loans, which are based on regular monthly bank deposits, according to Marco Carbajo, Founder of the Business Credit Insider’s Circle.

Revenue Based Loans


Typically a business owner can get a business loan equal to 10% of the annual gross deposits, regardless of having bad credit, notes Carbajo. If your business makes at least $12,500 per month in revenue (or $150,000 per year), then you could be eligible for a revenue-based loan with funding granted within seven business days.

OnDeck is an online small business lender in the U.S., issuing over $5 billion dollars in loans and trusted by over 50,000 small businesses. It provides funding in as fast as one business day. You must have at least $100,000 in annual revenues and have been in business for at least one year.

OnDeck works with small businesses that have annual revenue from $100,000 to $5 million, including doctors, dentists, restaurants, auto body shops, and beauty salons. However, the company doesn’t work with certain businesses, including funeral services, tax preparation services, and attorneys.

You can borrow anywhere from $5,000 to $500,000, with a 2.5% origination fee and interest rate at 5.99%. You apply for up to $1,000,000 in a line of credit, with an interest rate at around 13.99%.

For Credit Scores Under 500


With a personal credit score of at least 500 or 530, you could qualify for OnDeck. The lender reports payment activity to the three credit bureaus, so paying off your loan on time will help build your credit score.

With a score below 500, your best bet is a lender with no minimum credit score, such as Kabbage. A leading working capital lender, Kabbage provides instant cash advances. You can borrow anywhere from $500 up to $100,000. Kabbage’s fast, flexible business line of credit is always available. Borrowers can draw against their line as often as once a day for anything that they need.

Kabbage allows you to borrow money for up to six months, so if you borrow $50,000, you have to pay that entire sum back (plus interest) within the six-month time frame.  Fees are one percent–13.5% of the loan amount the first two months, and one percent for each of the remaining four months. One-sixth of the total loan amount, plus the monthly fee, is paid every month.