Can I get a business loan with bad credit?

Reviewed by Turan Zeynal, Managing Partner, Outset Funding Partners · Last reviewed July 17, 2026

TL;DR

Yes — but not from a bank or the SBA. Under a 650 personal FICO, your realistic options are revenue-based lenders (merchant cash advances, short-term online loans), collateral-backed products (equipment financing, invoice factoring), or a secured line of credit. The trade-off is speed and access for a higher effective cost.

Quick facts

Bank cutoff: ~680 FICO
SBA cutoff: ~680 FICO
Online term loan cutoff: ~600 FICO
MCA cutoff: ~500 FICO
Equipment financing cutoff: ~580 FICO
Invoice factoring cutoff: No minimum (customer credit matters more)

The 60-second answer

"Bad credit" isn't one number — it's a range that determines which lenders will look at you at all. Under 680 FICO, banks and SBA are almost always out. Under 650, most online term lenders decline. Under 600, your options narrow to products where the underwriting isn't primarily about your FICO.

The good news: US small business funding is broader than banks. Revenue-based lenders underwrite off your bank statements. Equipment lenders underwrite off the equipment. Invoice factors underwrite off your customer's creditworthiness. Bad personal credit does not close every door — it just closes the cheapest ones.

How it works, step by step

Pull your actual credit report
Get your real FICO and business credit reports before applying. Errors are common — dispute anything wrong before submitting a single application.
Sort options by what they underwrite
MCAs look at bank statements. Equipment lenders look at collateral. Factors look at your customers. Pick lenders whose underwriting favors your strongest signal.
Clean up bank statements first
Avoid overdrafts, negative balances, and NSFs for 60–90 days before applying. This is the single biggest lever for a bad-credit applicant.
Apply to 2–3 matched lenders — not 10
Multiple credit inquiries in a short window can further damage your score. Work with a broker or marketplace that soft-pulls first.
Accept the trade-off
Bad credit funding is more expensive. Use it for revenue-generating needs (inventory, marketing, equipment that produces income) — not for expenses you can cut.

How lenders actually treat a low FICO

"Bad credit" is a spectrum, not a wall. A 520 FICO with a recent bankruptcy and three open collections is treated very differently from a 590 FICO whose score dropped because of one medical charge-off two years ago. The specific derogatory events on your report — bankruptcies within 24 months, tax liens, judgments, active charge-offs — matter more to a business lender than the raw number. Two owners at the same 580 FICO can get wildly different offers depending on what dragged the score down.

What actually gets a business owner with weak credit approved is the bank statement pattern. Six months of clean, positive daily balances with consistent revenue deposits will unlock offers at 550 FICO that a spotty statement with NSFs and negative days can't get at 680. Before applying, pull your last 90 days of statements and count: how many negative days, how many NSF fees, how many days the balance dipped below $500. Fixing that pattern for one clean quarter typically expands your options more than any credit repair action.

Two products consistently work for weak personal credit — merchant cash advances (500+ FICO, revenue-based) and secured equipment financing (the equipment is the collateral). Unsecured term loans and lines of credit almost always require 600+.

Pros and cons

Pros

✓Real funding is available at every credit tier down to ~500
✓Approval driven by revenue and collateral, not just FICO
✓Speed — often faster than prime-credit bank loans
✓On-time payments rebuild business credit
✓Some products (factoring) don't require credit at all

Cons

×Materially more expensive than prime-credit products
×Shorter terms — cash flow needs to support fast payback
×Personal guarantee still required in most cases
×Predatory offers are common — read the contract
×Stacking multiple bad-credit products is how businesses fail

Who qualifies

•6+ months in business (12+ for most online term loans)
•$10,000+ monthly revenue (higher for larger amounts)
•Active business bank account
•No active bankruptcy
•Willing to provide 3–6 months of bank statements

Bad-credit funding options

Option	When to use	Watch out for
MCA (500+ FICO)	Need cash fast, have steady daily deposits	High factor rates; don't stack
Short-term online loan (580+)	Want a real loan structure with weekly payments	APRs of 30–80% common
Equipment financing (580+)	Buying revenue-producing equipment	Equipment secures the loan — repossession risk
Invoice factoring (no minimum)	You invoice B2B customers on net 30/60/90	Factor takes a cut of each invoice
Secured LOC (600+)	You have collateral (CD, savings, real estate)	Your collateral is at risk on default

Frequently asked questions

What's the lowest credit score that can get business funding?

Around 500 FICO for a merchant cash advance. Below 500, most funders decline. Invoice factoring is the main exception — it looks at your customer's credit, not yours.

Will applying for a business loan hurt my credit?

Hard credit pulls each ding your score by 5–10 points. Work with a broker or marketplace that soft-pulls first, and only submit final applications to lenders you're serious about.

Can I get an SBA loan with bad credit?

Almost never. SBA lenders typically require a 680+ personal FICO, and the SBA itself requires a satisfactory credit history. There is no formal minimum, but in practice, sub-680 gets declined.

How can I improve my chances with bad credit?

Clean up your bank statements (no overdrafts for 90 days), pay down credit card balances below 30% utilization, dispute any errors on your credit report, and apply for products that don't lead with FICO — MCAs, equipment financing, factoring.

Should I use a co-signer?

For most small business funding, lenders want the primary owner's guarantee — a co-signer with better credit rarely opens new doors. A better strategy is to add a business partner as a 20%+ owner whose credit qualifies.

Are there SBA microloans for bad credit?

SBA microloans (up to $50,000) are more flexible than 7(a) — the intermediaries who administer them can consider borrowers below the standard 680 threshold, especially in underserved markets. Approval is still not guaranteed.

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