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5 Best Business Loans for Bad Credit of April 2022

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If your credit history isn’t great, it can be difficult to get a loan from a bank or credit union. But bad credit business loans are available from alternative sources, like online or nonprofit lenders.

Interest rates on these products may be higher than traditional small-business loans, so you’ll want to shop around to get the best terms possible and make sure the payments will be manageable for your business.

Below, you’ll find our picks for the best business loans for bad credit — defined by FICO as a score between 300 and 629 — plus more information on how to qualify for financing.

Best business loans for bad credit

Our pick for short-term business loan for bad credit

If your credit score is at least 600, you may be able to qualify for a short-term business loan with amounts up to $250,000. These loans are good for specific, one-time purchases.

OnDeck – Online term loan

OnDeck offers a fast term loan for small-business owners with less-than-stellar credit who want to expand.

Maximum loan amount: $250,000.

Minimum credit score: 600.

Estimated APR: 9% to 99% (depending on your creditworthiness and business financials).

  • Cash can be available within the same business day.

  • Requires low minimum credit score.

  • Less paperwork than most lenders.

  • Fixed-fee structure means early repayment will not save interest.

  • Requires frequent (daily or weekly) repayments.

  • Requires business lien and personal guarantee.

Our pick for business line of credit for bad credit

A business line of credit may be available if your credit score is at least 600. You only pay interest on the funds you draw from the credit line, giving you more flexibility than a term loan.

Fundbox – Line of credit

Fundbox offers a business line of credit to fill a cash-flow gap, and qualifying is easier than with other lenders.

Maximum loan amount: $150,000.

Minimum credit score: 600.

Estimated APR: 10.1% to 79.8% (depending on your creditworthiness and business financials).

  • Financing available within one business day after approval.

  • Simple application with minimal documentation required.

  • Startup-friendly — accepts borrowers with a minimum of six months in business.

  • Low minimum credit score requirement.

  • No prepayment penalties, account maintenance fees or inactivity fees.

  • Rates are high compared to traditional banks.

  • May require personal guarantee.

  • Can’t be used to build business credit.

  • Weekly repayments are required over a short term (maximum of 24 weeks).

Our pick for fast business loan for bad credit

Some online lenders can approve applications and offer financing in as little as 24 hours.

BlueVine – Line of credit

BlueVine’s line of credit provides fast working capital for short-term borrowing needs.

Maximum loan amount: $250,000.

Minimum credit score: 600.

Estimated APR: 15% to 78% (depending on your creditworthiness and business financials).

  • Cash can be available within 12 to 24 hours.

  • Multiple term lengths for different financing needs.

  • Low minimum credit score requirement.

  • Startup-friendly; accepts borrowers with a minimum of six months in business.

  • May require weekly repayments.

  • Requires personal guarantee.

  • Not available in North Dakota, South Dakota or Vermont.

  • Rates can be high compared to traditional lenders.

Our pick for unsecured business loan for bad credit

Certain online lenders don’t require you to put up physical collateral to secure a bad credit business loan. Lenders may file a lien on your business assets or require you to sign a personal guarantee, however.

OnDeck – Line of credit

OnDeck offers a fast line of credit for small-business owners with less-than-stellar credit who need to manage cash flow or buy inventory.

Maximum loan amount: $100,000.

Minimum credit score: 600.

Estimated APR: 11% to 61.9% (depending on your creditworthiness and business financials).

  • Cash can be available within the same business day.

  • Requires low minimum credit score.

  • Less paperwork than most lenders.

  • Fixed-fee structure means early repayment will not save interest.

  • Requires weekly repayments.

  • Requires personal guarantee.

Our pick for equipment loan for bad credit

The equipment you purchase with this type of financing serves as collateral on the loan itself, meaning online lenders may be more flexible with their credit qualifications.

Triton Capital – Equipment financing

Triton Capital offers fast equipment loans up to $250,000 for businesses in a range of industries.

Maximum loan amount: $250,000.

Minimum credit score: 600.

Estimated APR: 4.99% to 25% (depending on your creditworthiness and business financials).

  • Can fund within one to two business days.

  • No prepayment penalty.

  • Flexible repayment options: monthly, quarterly, annually or semi-annually.

  • Typically requires a personal guarantee and UCC lien.

  • Requires high minimum annual revenue.

Methodology

We chose bad credit business loans from online lenders that are willing to work with borrowers who have FICO scores below 630.

Lenders that appear on this list meet the following criteria:

  • Personal credit score requirements below 630.

  • Maximum loan amounts ranging from $100,000 to $250,000.

  • No more than two years in business required.

  • Funding available within one to two business days of approval.

  • Transparent rates and repayment terms.

What is a bad credit score?

A bad credit score typically falls from 300 to 629 (on a scale of 300 to 850), according to the most common credit scoring models, such as FICO and VantageScore. Personal credit scores ranging from 630 to 689 are generally considered fair credit.

Individual small-business lenders may have different guidelines of what defines a bad credit score; however, bad credit business loans usually cater toward borrowers with FICO scores below 630.

Although lenders tend to focus on your personal credit score, some may also use your business credit score to evaluate your loan application. Your business credit score reflects your business’s payment history with banks, vendors and other creditors.

How to get a business loan with bad credit

It’s possible to get a business loan even if you have bad credit. Here are four steps you can follow to access the financing your business needs.

1. Check your credit

Before applying for a small-business loan, check your credit to know what lenders are going to see. You can get a free credit score on NerdWallet, and pull your personal credit report from the three major reporting bureaus for free at AnnualCreditReport.com. Business credit scores are available from Experian, Equifax and Dun & Bradstreet.

2. Build up your credit, if possible

If your credit score is lower than you’d like, consider ways to build it up before applying for business financing. For example, look for any errors on your credit reports and dispute them with the appropriate credit bureau. Other credit-strengthening strategies can include making payments more often and paying down or paying off debt, which can build your business credit as well.

3. Understand your eligibility requirements

Even if you have a less-than-perfect credit score, you may still qualify for business financing. Before comparing different types of bad credit business loans, however, it’s helpful to understand the criteria lenders will use to evaluate your business.

In addition to your credit score, small-business lenders are likely to consider the following:

  • How long you’ve been in business.

  • What your annual revenue is.

  • How strong your cash flow is.

  • What kind of collateral you can provide.

The reasons behind your low credit score may also influence a lender’s decision. For example, it will likely be harder to get approved if a recent bankruptcy or loan default is what’s dragging your score down.

4. Shop around and choose the best loan option for your business

Although a lower credit score may mean you have fewer options to choose from, you should still shop around and compare loan products.

Certain types of small-business loans may be easier for businesses with bad credit to qualify for — especially if you can back the loan in some way.

Invoice factoring or financing, for example, can turn unpaid customer invoices into immediate cash and is well suited for business-to-business companies. While lenders may still check your credit score, approvals are based mainly on the value of your invoices.

Similarly, a merchant cash advance can let you tap into your credit and debit card sales for financing. But this kind of loan should be a last resort, as rates can reach triple digits.

You can research different lenders and loan products so that you can find the right fit for your business’s needs.

A low credit score may result in a higher interest rate, which could make it difficult to repay your new loan — and leave you worse off financially than you started. By comparing loan offers to get the best deal possible, you’ll better position yourself for success.

Where to get a business loan with bad credit

Banks and credit unions likely won’t approve you if you have bad credit. But these alternative sources may let you get a business loan with a less-than-ideal credit history:

Online lenders

Most online lenders require a minimum personal credit score between 500 and 650. But a few have no minimum credit score requirement, focusing on factors like your business’s cash flow instead. Online lenders offer easier approvals and faster funding than other business lending options, but they typically charge higher rates — even for those with good credit.

CDFIs

A community development financial institution, or CDFI, receives government funding to provide banking access to low-income or underserved communities. CDFIs are often banks and credit unions, but don’t have the same strict credit requirements for lending those financial institutions have. If you’re eligible for CDFI financing, you could get a competitive interest rate. Funding can be slower than online lenders, though.

Microlenders

If you have bad credit, you may be able to get a microloan for your business. Microloans typically come from nonprofits. Because profit isn’t these organizations’ primary driver, they may be more willing to lend to business owners with a thin credit history.

Some microlenders also participate in the SBA microloan program and may work with newer businesses that have rocky credit histories. Many of these lenders focus on issuing loans to traditionally underserved businesses in their communities.

The downside of a microloan is right in its name: Funds typically top out around $50,000, which may not be enough for your company’s needs.

Compare more small-business loan options

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Frequently asked questions

Can I get a business loan with bad credit?

Some online and nonprofit lenders accept borrowers with bad personal credit scores (300 to 629 FICO). Lenders will likely consider factors such as your annual revenue, time in business, cash flow and collateral in addition to your credit score.

A lower credit score may still result in a pricier loan, so building your credit first may qualify you for cheaper options.

What credit score is required for a business loan?

Most lenders require a minimum credit score ranging from 500 to 650 FICO, but some have no minimum requirement. Your annual revenue and time in business may also be considered on your application. Shop around and compare small-business loans to get one that fits your needs.

Can I get a startup business loan with bad credit?

Nonprofit organizations and CDFIs may be willing to work with startups with bad credit. Many of these organizations focus their lending efforts on low-income and underserved businesses in their communities.

Some online lenders may also offer startup business loans even if you have bad credit — but your options will be limited, and they can be expensive. Plus, you’ll typically need at least six months in business and a minimum credit score of 600 to qualify.

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4 Tips for Starting an Industrial Business

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The industrial sector is a broad category that covers businesses involved in the manufacturing, production, and distribution of goods. Small industrial companies are growing across the country and there are many opportunities for entrepreneurs to get involved in this sector.

As with any type of business, there are certain things you need to do to set yourself up for success. Here are four tips for starting an industrial business:

photo credit: Pixabay

1. Do Your Research

Market research means figuring out who your target customers are and what they want or need. There are a number of different ways to do this, but some of the most common include surveys, interviews, focus groups, and observation.

Surveys can give you a good overview of customer opinions while interviews or focus groups can help you to delve deeper into specific issues. Observing potential customers in their natural environment can also be helpful in understanding their behavior and needs.

2. Choose the Right Niche

When it comes to starting an industrial business, one of the most important decisions you’ll make is choosing the right niche. There are a number of factors to consider when making this choice, and it’s important to do your research before settling on a particular industry.

First, you’ll need to identify the needs of your potential customer base, such as the products or services they need. Once you have a good understanding of the market, you can then start to narrow down your options. Consider the competition in each niche and decide which one offers the best opportunity for success. When making your final decision, it’s essential to choose a niche that you’re passionate about.

3. Create a Business Plan

In today’s competitive marketplace, it’s more important than ever to choose the right niche for your industrial business. When you specialize in a specific industry or type of product, you can better meet the needs of your target market and stand out from the competition. How do you know what niche is right for your business? Here are a few things to consider:

First, think about your strengths. What does your company do better than anyone else? What unique skills or experience do you bring to the table? Use these strengths to narrow down your focus and choose a niche that you’re passionate about.

Next, consider your target market. Who are you trying to reach with your products or services? What needs do they have that you can address? When you choose a target market and understand their needs, you’ll be better able to choose a niche that meets their demands.

Finally, don’t be afraid to experiment. Trying new things is essential for any business, so don’t be afraid to test out different niches to see what works best for you. By keeping these tips in mind, you can be sure to choose the right niche for your industrial business.

Engineers work with industrial printer

4. Optimize Your Processes

Through industrial control engineering, you will be able to identify opportunities for improvement and design solutions that achieve the desired results. In many cases, these solutions involve the use of automation and other advanced technologies.

By optimizing industrial business processes, industrial control engineers can help to improve efficiency and increase productivity. In addition, they can also help to improve safety conditions by reducing the potential for accidents. As industries continue to grow and become more complex, the demand for qualified industrial control engineers is likely to increase.

Endnote

With an increased demand for industrial operations and manufacturing, there has never been a better time to start an industrial business. By following these four tips, you can be sure to set your business up for success.

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How to Find the Right Business Coach — and Avoid the Wrong One

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At its best, business coaching can connect you with a mentor and supporter who helps you generate ideas, make plans and execute on them.

But at its worst, a business coaching offer can cost you time, energy and money — without much to show for it.

Here’s what to expect from a business coach, how to find a coach that suits you and how to spot red flags.

What a business coach can do

Business coaches draw on their professional experience to help you set and achieve your own business goals.

“I’m here to help you, and I’m here to raise your level of knowledge in whatever way I can,” says Gary Robinson, who chairs the Memphis, Tennessee, chapter of SCORE. SCORE offers free business mentoring for entrepreneurs nationwide.

Some ways a business coach or mentor might do this include:

  • Offering feedback on your ideas and suggesting new ones.

  • Giving you templates and other tools that help you make plans.

  • Connecting you with resources in your region or your industry.

  • Giving you deadlines and holding you accountable to them.

Some business coaches may also offer coursework or group training sessions on particular topics, like sales.

Working with a coach should help you identify opportunities you hadn’t seen before or develop new strategies for pursuing those opportunities, says Sophia Sunwoo, who coaches women and nonbinary entrepreneurs through Ascent Strategy, her New York City-based firm.

“[Coaches] don’t necessarily have to have all the answers,” Sunwoo says. “But they are the people that know how to maneuver and create a bunch of different thinking paths for their clients.”

What a business coach can’t do

A business coach isn’t the same as a consultant, whom you would hire to perform a specific task. A coach or mentor could look over your business plan, for example, but they wouldn’t write it for you.

“If you were to hire me as a consultant, you would expect me to roll up my sleeves and pitch in and work with you to get things done, and you would pay me for that,” Robinson says. Coaches, on the other hand, “try to show you how to do things so that you can do them [yourself].”

Business coaches are also not therapists, Sunwoo says. Entrepreneurship can be emotionally and mentally taxing, but it’s important that coaches refer clients to mental health professionals when necessary.

Business coaching red flags

If a business coaching opportunity “promises guaranteed income, large returns, or a ‘proven system,’ it’s likely a scam,” the Federal Trade Commission warned in a December 2020 notice.

In 2018, the FTC took legal action against My Online Business Education and Digital Altitude, which purported to help entrepreneurs start online businesses. The FTC alleged these companies charged participants more and more money to work through their programs, with few customers earning the promised returns.

In both cases, these operations paid settlements, and the FTC issued refunds to tens of thousands of their customers in 2021 and 2022.

To avoid offers like these, the FTC recommends that you:

  • Be wary of anyone who tries to upsell you right away or pressures you to make a quick decision.

  • Search for reviews of the person or organization online.

  • Research your coach’s background to see if they’ve accomplished as much as they say.

Sunwoo says to also be skeptical of one-size-fits-all solutions. A coach should customize their advice to your personality and skill set, not ask you to conform to theirs.

“The moment that a business coach pushes you to do something that is really not compatible with your personality or your beliefs or values,” Sunwoo says, “that’s a huge problem.”

How to find the right coach — maybe for free

Here’s how to find a coach that will be as helpful as possible.

Determine whether you need advice or to hire someone. A coach isn’t the right fit for every business owner. If you need hands-on help organizing your business finances, for instance, you may need a bookkeeping service or accountant. And take legal questions to an attorney.

Seek out the right expertise. A good coach should be aware of what they don’t know. If they’re not a good fit for your needs — whether that’s expertise in a particular industry or a specialized skill set, like marketing — they might be able to refer you to someone who’s a better fit.

Consider free options. There may be some in your city or region:

  • SCORE offers free in-person and virtual mentoring in all 50 states, plus Guam, Puerto Rico and other U.S. territories.

  • See if your city has a Small Business Development Center, Veterans Business Outreach Center or a Women’s Business Center. All are funded by the U.S. Small Business Administration and offer free training and advising for entrepreneurs.

  • Do an online search for city- or state-specific programs. Philadelphia, for example, offers a business coaching program designed for entrepreneurs who want to qualify for particular business loan programs. Business incubators often offer courses or coaching.

Make sure your coach is invested in you. They should take the time to learn about you, your business and its unique needs, then leverage their own experiences and creativity to help you.

“I’m on your team now,” Robinson says of his clients. “Let’s do this together and make this a success.”

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Are There SBA Loans for the Self-Employed?

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Many of the same SBA loans are available to both self-employed people and more formally structured businesses, such as limited liability companies and corporations. However, self-employed individuals, like sole proprietors and independent contractors, might face a higher barrier to entry for having limited credit history, inconsistent revenue or no collateral. If they can’t qualify for an SBA loan, other business financing options are available.

Who qualifies as self-employed?

Sole proprietors, independent contractors and partnerships all fall under the self-employed category. In these cases, there is no legal distinction between the business owner and the business itself. Sole proprietors, for example, are solely responsible for their business’s gains and losses, while LLCs and corporations are legally distinct from their owners. This distinction helps protect the owners’ personal assets if their business runs into legal or financial issues.

Are self-employed SBA loans hard to get?

While a sole proprietorship is much easier to set up than an LLC or corporation, lenders may be more hesitant to finance them for a few reasons:

  • Self-employed business owners are legally responsible, as individuals, for any debt and liabilities that their businesses take on. If someone sues their business, for instance, their personal assets — not just their business — could be at stake. This makes it riskier for lenders to finance them.

  • Sole proprietorships and independent contracting businesses may have lower revenue or less collateral to offer since they’re often a business of one. This could make it more difficult for them to prove that they can pay back the loan, plus interest. And it may require more paperwork.

  • Some banks set lending minimums that surpass what a self-employed business owner is looking for, either because the business owner doesn’t need that much funding or doesn’t qualify for it.

  • Since there is no legal distinction between the self-employed business owner and their business, they may lack business credit history. To establish business credit, you’ll want to register the business, obtain an employer identification number and open a separate business bank account and credit card to keep your business and personal finances separate.

SBA loans for the self-employed

SBA microloan: Best for small loans and more lenient requirements

Applying for an SBA microloan is a great option for self-employed business owners, especially if they’ve been turned down by traditional banks and don’t need more than $50,000 in funding. In fact, the average SBA microloan is around $13,000, according to the SBA. SBA microloans are administered by nonprofit, community-based organizations that can also help train applicants in business practices and management. And because the loans are small, the application process may be easier — applicants may have limited credit history and typically don’t need as high of a credit score as they do for an SBA 7(a) loan.

SBA 7(a) small loan: May not require collateral

Funds from the SBA’s most popular 7(a) lending program can be used for a variety of business-related purposes, such as working capital or purchasing equipment. While the maximum SBA 7(a) loan amount is $5 million, SBA 7(a) small loan amounts don’t exceed $350,000. And if the 7(a) small loan is for $25,000 or less, the SBA doesn’t require lenders to take collateral.

SBA Express loan: Best for quicker application process

SBA Express loans are a type of 7(a) loan for businesses that need quick financing and no more than $500,000. The SBA responds to these loan applications within 36 hours as opposed to the standard five to 10 days, which may speed up the process for borrowers working with non-SBA-delegated lenders. Additionally, borrowers might not have to fill out as much paperwork — the SBA only requires Form 1919. Beyond that, lenders use their own forms and procedures.

SBA loan alternatives

Online lenders

Self-employed business owners turned down for SBA or traditional bank loans may be able to qualify for financing with an online lender. These lenders offer options such as term loans and lines of credit, and they often process applications faster and have more lenient requirements. However, applicants should expect to pay significantly more in interest than they would with an SBA loan.

Business credit cards

Not only can business credit cards help build your business credit history and pay for everyday business purchases, but they can also help finance larger purchases (within your approved credit limit). And if you qualify for a credit card with a 0% introductory APR offer, you’ll have multiple months to pay off the balance interest-free. Just make sure you’re able to pay off your purchase before the intro offer ends and a variable APR sets in.

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