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How to Get a Business Loan with Bad Credit 2022 

As an entrepreneur, starting a business can be an exciting experience, but it can be daunting at the same time. An overwhelming majority of aspiring entrepreneurs usually possess exceptional ideas, which they look forward to translating into significant businesses. 

Unfortunately, insufficient capital often stops them from executing their entrepreneurial dreams. However, money shouldn’t deter you if you have business skills and have taken the proper steps.  

Although getting cash to support your dreams, especially when you have bad credit, may seem impractical, it shouldn’t limit you from formulating a comprehensive business plan that highlights your strategies for success and your way of operations. This is because you can still secure startup business loans without subjecting individual assets on the line. 

However, this type of financing is costly, as it entails exorbitant rates that compensate for the lender’s risk. There are many types of loans and financing that consider individuals who may be credit unworthy. If your credit score is bad, you can still access these loan options:

Online Business Loans

Today, many online business lenders may provide alternative bad credit business loans with minimal strict measures compared to conventional banks. One significant advantage of getting loans via these channels is the quick approval and funding times.

When you apply for online business loans, you must prove that you can repay the loan beyond any reasonable doubt. However, it is imperative to understand the many drawbacks associated with such financing. 

While the APR is very high, you have a short repayment period. Also, you may be required to present a personal guarantee, which means it may affect your credit in case of late payments. You also risk losing your assets if your business is not in a position to pay back the loan. 


Microlenders are usually non-profit organizations that assist entrepreneurs with bad credit to get capital for business startups or for running a business. However, their loan limit is relatively low as it amounts to several thousand dollars. For instance, the U.S. Small Business Administration (SBS) Microloan Program gives a limit of $50,000. 

There are many microlenders across the US, and you can explore them to find how they operate and learn their standards. However, most of these microlenders may require you to explain lower credit scores.

Credit Cards for Small Business

A business card provides a line of credit obtained with the card. It allows entrepreneurs to benefit from a revolving credit limit for handling business expenses. You could be a potential candidate for such financing even if you have bad debt or your credit score is not yet established. 

The annual percentage rate of the best business credit card can go up to approximately 25%, but interest-only emanates from the balance carried forward. 

Merchant Cash Advance

This type of financing only applies to businesses that accept credit card transactions. In this, you receive a considerable amount of money at one time, which the borrower must use as working capital. From this lump sum, you will be required to repay a portion of the credit card transactions, commonly referred to as holdback amount, until you clear your balance. 

However, the merchant cash advance does not charge interest. Instead, the lender uses a factor rate, which is a multiple of what you borrowed, such as 1.5. For instance, suppose you get a cash advance of $25,000. 

If you multiply that with a factor rate of 1.5, you get a total balance of $37,500. Therefore, the financing would cost you $12,500, an exorbitant form of business funding. 

Since they do not classify merchant cash advance as a loan, it has minimal, strict measures, and their regulatory oversight is not as stringent as conventional loans. 

Invoice Factoring

Invoice factoring is how businesses finance their cash flow by selling their invoices at a lower amount to a third party, usually approximately 85% of the total invoice amount. For a startup that already has some debts, you can apply invoice factoring to boost your cash flow as you wait for payments from your customers. 

The third party will collect the cash from the customer and send a percentage of the invoice balance, excluding the factoring fee. Invoice factoring is not mandatory to provide stringent qualification requirements for other business loans. 


Getting a business loan with bad credit can be nerve-wracking, especially if you are starting a business for the first time. However, you can still access a loan, even with a poor personal credit score or zero business score. The most crucial thing is to determine your borrowing needs, explore the many loan options, and look for lenders without stringent lending standards. But don’t forget that your interests will be higher than that of an applicant who is creditworthy.

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