Key takeaways
- Many lenders state their credit score requirements, helping you narrow down small business loans for bad credit.
- Some lenders focus more on future sales or revenue from invoices than on business credit history.
- Offering assets or collateral can make you less risky and improve your chances of approval with the lender.
Good news: having a credit score of 500 doesn’t make getting a business loan impossible. But since that score is considered poor, you will need to look for bad credit business loans. You should prepare for higher borrowing costs, including higher interest rates than lenders would extend to strong credit borrowers.
To find the best business loan, compare multiple lenders and financing offers, searching for the lender that will offer you the lowest rates and favorable terms for your credit level. We researched lenders for you to find seven of the best business loans with a 500 credit score.
Compare the best small business loans for a 500 credit score
| Lender | Best for | Min. credit score |
|---|---|---|
| SBA microloans | Affordable business loans | 500, but sometimes there’s no credit requirement |
| Fundible | Low revenue requirement | 450 |
| Fora Financial | Fast business loans | 570 |
| Bank of America | Credit-building line of credit | Not stated |
| Kiva | Crowdfunding | Doesn’t check credit |
| PayPal | No-credit-check business loan | None for working capital loans |
| Uncapped | High-producing startups | None; Relies on other business factors |
SBA microloans: Best for affordable business loans
SBA microloans are government-backed small business loans designed to support businesses that are commonly turned down by traditional lenders. These loans offer loan sizes of up to $50,000 and SBA interest rates ranging from 8% to 13%. These features are offered in hopes of providing manageable loan payments to disadvantaged businesses.
You can find SBA microloans through approved microlenders, usually nonprofits dedicated to educating small business owners and helping businesses grow. But like most types of SBA loans, it can take 30 to 90 days to complete the funding process.
Fundible: Best for low revenue requirement
Fundible offers the best blend of online business lending and leniency toward credit and revenue. The lender accepts revenue as low as $100,000 per year. Loans offered with this revenue minimum include equipment financing, business lines of credit, bridge loans and invoice financing. Although its website states the minimum credit score is 500, a Fundible representative stated that the fintech lender works with business owners who have credit scores as low as 450.
Fora Financial: Best for fast business loans
Fora Financial stands apart as an online lender granting high-dollar business loans within 24 hours or less. Small business owners can choose between a short-term loan, a line of credit or a revenue advance, which is the equivalent of a merchant cash advance. It’s also one of the few online lenders to offer SBA loans, in case you’re looking to go with a government-backed loan. Its loans offer loan amounts ranging from $5,000 to $1.5 million.
Bank of America: Best for credit-building line of credit
Bank of America offers a variety of business loans built for different needs, from revolving lines of credit to equipment loans to one-time short or long-term loans. Its cash-secured business line of credit is one of its most unique loans, designed to help you build business credit and start a relationship with this lender. Bank of America lets you open this credit line with a minimum $1,000 deposit or more. The security deposit acts as the available credit limit that you can draw from.
Kiva: Best for crowdfunding
Kiva is one of the best-kept secrets in business lending, in which a business owner can get a loan with no revenue or credit score requirements. Small business owners start by reaching out to their network of family and friends to fund their projects within 15 days or less. Once the private funding is over, business owners can publicize their financing needs to Kiva’s network of millions of lenders. Unlike traditional loans, Kiva’s business loans don’t charge any interest or loan fees. Kiva works best for microloans of $15,000 or under.
PayPal: Best for no-credit-check business loan
PayPal presents an exclusive business loan offer to small businesses that already use its payment processing platform. PayPal merchants can choose a working capital loan or a short-term loan, both of which are relaxed enough to accept poor credit. A PayPal working capital loan requires no credit check which is a rare find in business lending. Instead, it qualifies you based on the volume of sales you bring in through PayPal.
Loan terms are flexible. With the PayPal business loan, you can repay the business loan in 17 to 52 weeks. With the working capital loan, you choose a repayment plan that tells PayPal what percentage of sales gets applied toward the loan.
Uncapped: Best for high-producing startups
Uncapped offers working capital funding and lines of credit through online lending. It relies on analyzing your financial accounts to approve its loans, rather than using your credit history. It can then fund business loans starting at $10,000. It also offers a line of credit, allowing you to access funding as needed, up to $10 million.
Types of small business loans for bad credit
Getting approved for a business loan may come down to picking the right type of business loan for bad credit. You’ll need to confirm the credit score requirements for some loans like a short-term business loan or line of credit. Others like merchant cash advances are designed specifically for bad credit borrowers.
| Type of bad credit business loan | How it works |
| Short-term business loan | A loan with short repayment terms, often for two years or less, with limited loan amounts |
| Business line of credit | Reusable credit that, once approved, you can draw from at any time. You only pay interest on the amount you withdraw. |
| Microloan | A small loan offered as a conventional, alternative or SBA loan; SBA loans allow borrowing up to $50,000 |
| Invoice financing | Financing approved based on a percentage of your outstanding invoices and repaid once the invoices are settled |
| Merchant cash advance | Financing approved based on future debit or credit card sales and repaid from a percentage of your sales |
| Secured business loan | If you have collateral to back the loan, lenders will take on less risk and be more willing to approve you for the business loan. |
How to apply for a small business loan for a 500 credit score
A small business owner with a 500 credit score will need to find the right lender and do the extra groundwork when applying for credit. Taking these steps may boost the odds of approval:
1. Know your credit score
If you know you have bad credit, it’s best to check your exact credit score to know your benchmark when applying for business loans. Most lenders set minimum credit requirements to get approved for a bad credit business loan. You’ll need to meet the lender’s minimum credit score requirement in order to apply with that lender.
For a business loan, the lender may look at your personal or business credit history. You can establish business credit by working with vendors that offer trade credit or by paying for expenses with a business credit card.
2. Compare loan terms
Once you know what type of loan you need, you want to compare loans from different lenders to see which loan will offer you the best terms. What you should consider:
- Eligibility requirements: You’ll want to see if you meet the lender’s minimum requirements to be eligible for a loan from them. Look for lenders that accept credit scores as low as 500.
- Interest rate and fees: Consider the costs of getting a loan with different lenders. Bad credit business loans tend to have high interest rates anywhere from 30% to 100%, depending on the lender. You may have to prequalify with a lender to see what interest rates it will offer you. Prequalification allows you to see your loan offer without performing a hard check on your credit. Consider reputable lenders that offer you the lowest costs possible.
- Repayment terms: Most bad credit business loans offer short terms of 24 months or less. If you need low monthly payments, you’ll need to do your research to find a lender with longer terms, such as five to seven years. Longer terms will help to spread out the cost of the loan over a longer period, lowering each repayment.
3. Prequalify with multiple lenders
Once you know your funding needs and you’ve narrowed down financing options, you can look for the best bad credit business loans. If available, prequalify with multiple lenders to see the loan terms you qualify for without performing a hard check on your credit.
Then, compare multiple loan offers from different lenders. Your goal is to find the offer with the lowest interest rates and fees and the best features your business is eligible for, such as long repayment terms. Some lenders will require collateral or that you sign a personal guarantee, which makes you personally responsible for repaying the loan.
4. Apply for a bad credit business loan
Finally, you can formally apply with the lender of your choice. Gather the loan documents required to submit the application, which may include bank statements, business formation documents, tax returns and profit and loss statements. Then, keep in touch with the loan officer in case you need to submit additional documentation or information.
Once you’re approved, you will then provide the lender with your bank information and wait for the funds. Online lenders often offer funding within one or two days, while major banks and credit unions might take a week or two to disburse the funds.
Factors that influence your chance of approval with bad credit
Credit score isn’t the only area that lenders look at when evaluating you for a business loan. They look at various factors to get a picture of how you manage your business finances and whether your business brings in enough revenue to cover loan repayments.
Factors they evaluate:
- Your credit score. If you have a credit score in the low 600s, you will have more options than a business owner with a 500 credit score. Either way, you will need to look for lenders that cater to businesses with bad credit.
- Time in business. If you’ve been in business for a long time and have only recently run into financial hardship, the lender may take your history into account and approve your loan.
- Revenue. Strong revenue and projections of revenue increases will help you prove that your business can repay the loan.
- Current debts. Lenders want to make sure that your business can manage current debts as well as the new loan. They may measure your debt load using the debt-to-income ratio (DTI) and debt service coverage ratio (DSCR), which show whether you have enough revenue to cover all your debts.
- Business plan. Having a well-thought-out business plan that outlines revenue projections and how you plan to grow your business will help lenders see that you’re prepared and ready to manage a business loan.
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