Bad Credit? Here’s Where to Find Funding for Small Businesses

Lack of funding is one of the reasons why many businesses fail. It’s hard getting funding when you have bad credit, especially with major banks. It implies that you don’t have your finances in order and you are considered high risk.

According to FICO, bad credit is anything below 629. 

Nowadays, you can access funding with a poor credit score thanks to the vibrant lending industry. Many lenders are choosing not to focus on poor credit but instead focus on other areas such as business revenue, business potential, operating history, and business strength.

When you choose to go down this path, you have to approach it with a lot of caution. This is because there are conditions attached, such as hefty interest rates, frequent payments, and short repayment terms.

So, where can you find business loans with bad credit?

 Here are some ideas on where to look for funding if you’re an entrepreneur with a bad score.

  1. Apply for microloans

Microloans are short-term loans between $5,000 and $50,000. They usually have a repayment period of between 3 to 18 months.

You can get a microloan from the U.S Small Business Administration lending program. SBA offers money to be strictly used as capital to buy inventory, furniture or fixtures, or machinery or equipment. It cannot be used to purchase real estate or pay existing debt.

Other companies and organizations that provide the same include Prosper, Zopa, Kiva.org, etc

  1. Business cash advances

These are sometimes referred to as merchant cash advances. 

They only apply to people with cash flow problems, typically $10,000 or less.

They have high APRs meaning that you’ll pay more than what you initially receive in the long run, more so if you miss a payment. 

Business cash advances can be repaid in any of the following ways; from your future debit and credit card sales, or by bank transfer when it’s time to pay.

Note that, although this method can be useful when you have bad credit, it’s also the most expensive.

  1. Business credit cards

Business credit cards are a great way to help build your credit. However, there are things to keep in mind when it comes to bad credit business credit cards such as:

  • Keep track of your credit score
  • Ensure that a business credit card is a good option for you
  • Make timely payments
  • Pay amounts in full
  • Don’t use too much of the debt

An example of a bad credit business credit card is the Capital One Secured MasterCard. With this, you can receive funding with poor credit or no credit at all.

  1. Peer to peer lending

Peer to peer lending continues to grow in popularity. It’s on the verge of overtaking traditional lending because it is faster to process financing, and you can access the funds faster than in traditional loans.

What you need to is; complete an online application on the platform’s website-say why you need the loan, how much you need, and your length of repayment. 

However, with poor credit, you might have to pay high-interest rates. 

  1. Invoice financing

With invoice financing, you get money for your unpaid invoices. To approve funding and set interest rates, lenders check customers’ payment history to determine if they’ll make timely payments.

You can be offered up to 85% of the outstanding invoice amount then when the customers pay, and you get the 15% less any costs incurred.

Examples of companies that provide this are Landio and Fundbox.

  1. Friends and family

More than 50% of small businesses get funding from friends and family. Chances are they trust you and believe in your business. So, they won’t mind about your bad credit.

If your friends and family won’t finance your business, who will?

  1. Gifts and grants

If you want to avoid debts, don’t overlook gifts and grants. The search for these can be long, but when you do your homework, you can locate these programs. 

Some businesses that seem to qualify for these include; health care, tech and retail businesses in low-income areas.


Bad credit doesn’t have to prevent you from acquiring the funding that your business needs to grow. As you can see, it’s not impossible to get business funding.

Whether or not you decide to take a bad credit business loan, good credit is of great value. You should, therefore, work on rebuilding your credit to qualify for more and better options.

Caroline Wanjiru

May 25, 2020