How to Get a Small Business Loan with Bad Credit

Bad credit can be a major obstacle for small business owners looking to get a loan. However, there are still options available for those with less-than-perfect credit.

In this guide, we’ll share some tips on how to get a small business loan with bad credit.

First, let’s look at some of the reasons why your credit score may not be as strong as you’d like it to be.

There are a number of things that can cause your credit score to drop, including:

  • Late or missed payments on loans or other debts
  • Defaults or foreclosures on loans
  • Bankruptcy
  • Too much debt relative to your income
  • Length of time you’ve been using credit
  • Number of recent inquiries into your credit report

If any of these apply to you, don’t despair—there are still options for getting a small business loan with bad credit. Here are 8 tips:

1. Look into government-backed loans.

The U.S. Small Business Administration (SBA) offers a number of loan programs that can be easier to qualify for than traditional bank loans, even if you have bad credit. SBA-backed loans include the 7(a) Loan Program, the Community Advantage Program, and the Microloan Program.

2. Consider a collateralized loan.

With a collateralized loan, you put up some form of collateral—such as property, equipment, or inventory—to secure the loan. If you default on the loan, the lender can seize the collateral to recoup their losses. Because collateralized loans are less risky for lenders, they may be more willing to approve them for borrowers with bad credit.

3. Find a cosigner.

A cosigner is someone who agrees to sign your loan application with you and share responsibility for repaying the debt. Having a cosigner with good credit can increase your chances of getting approved for a loan, even if your own credit isn’t great. Just keep in mind that if you default on the loan, your cosigner will be on the hook for repaying the debt.

4. Apply for a loan from an alternative lender.

There are a number of online lenders that specialize in loans for small businesses, including those with bad credit. Some of these lenders use alternative criteria to assess your creditworthiness, such as your business’s revenue and cash flow.

5. Get a business credit card.

If you have bad personal credit but your business is in good standing, you may be able to get a business credit card. These cards often have higher limits and lower interest rates than personal credit cards, making them a good option for financing business expenses. Just be sure to use the card responsibly, as missed payments can damage your business’s credit score.

6. Improve your credit score.

If you’re hoping to get a small business loan with bad credit, it’s worth taking steps to improve your credit score. Some things you can do to improve your credit include:

  • Making all of your loan and debt payments on time
  • Keeping your balances low relative to your credit limits
  • Only applying for new credit when you need it
  • Checking your credit report for errors and correcting them

7. Consider a short-term loan.          

If you need financing for a short-term business goal—such as stocking up on inventory or making payroll during a slow period—a short-term loan can be a good option. These loans typically have terms of one year or less and can be easier to qualify for than traditional bank loans.

8. Find a lender that specializes in bad credit loans.

There are a number of lenders that specialize in providing loans to small businesses with bad credit. These lenders may be more willing to approve your loan application, even if your credit score isn’t perfect.


These are just a few tips on how to get a small business loan with bad credit. If you have bad credit and are in need of financing, don’t give up—there are still options available to you. Talk to a lender about your options and see what they can do to help you get the funding you need.

By following these tips, you can increase your chances of getting approved for a small business loan—even if you have bad credit.

Following these tips can help you get the financing you need to keep your business running, even if your personal credit isn’t perfect.