Best Small-Business Loans for Bad Credit

Having poor credit doesn’t automatically shut the door on business funding — it changes which doors are easiest to open. Below I’ll run through realistic loan types and lenders that tend to work with lower credit scores, plus pros/cons, what you’ll need to apply, and practical steps to improve approval odds.

1) SBA microloans and community microlenders — best mix of price and flexibility

If you qualify, SBA microloans (made through nonprofit, community-based intermediaries) are often the smartest option for businesses with damaged credit because the intermediary lenders weigh the whole business and community mission, not just a FICO number. Amounts are small (typically up to $50,000) and terms can be borrower-friendly. Approval requirements vary by intermediary — some will consider applicants whose credit isn’t pristine if cash flow and the business plan show repayment ability. (Small Business Administration)

Ideal for: startups, small retail, food stalls, personal-service businesses that need small working-capital or equipment money.
Watch for: application time, local availability, and sometimes strong non-financial vetting (business training requirements).

2) Crowdfunded / peer lenders (Kiva and community crowdfunding) — zero or low-interest options

Kiva and similar crowdfunded lenders are notable because they often have no minimum credit-score threshold and offer 0% or very low-cost loans for smaller amounts ($1,000–$15,000 in many U.S. programs). Approval is driven more by your pitch, community support, and basic eligibility rules than a traditional credit score. If you can create a good campaign and rally social networks, this is one of the cheapest ways to borrow with bad credit. (Kiva)

Ideal for: micro-businesses that can mobilize community support or social proof.
Watch for: time to fund (it’s slower than instant online lenders) and modest maximum loan sizes.

3) Invoice factoring and invoice financing — use when you invoice creditworthy customers

If your business sells to reliable B2B customers and issues invoices, factoring or invoice financing is a strong choice. Lenders advance a large portion of outstanding invoice value and collect directly from your customers — meaning approval is based largely on your customers’ credit, not yours. This can be fast (often 24–48 hours) and doesn’t require a high personal/business credit score. However it’s effectively selling receivables at a discount, so fees/discounts can be significant. (Swoop UK)

Ideal for: B2B businesses with steady invoicing cycles and reliable customers.
Watch for: effective cost (factor fee), potential requirements that you or your customers sign paperwork, and reputational risks if the factoring firm handles collections clumsily.

4) Online alternative lenders and lines of credit (Fundbox, BlueVine, etc.) — faster but pricier

Several fintech lenders offer lines of credit, short-term loans, or merchant cash advances with looser credit gatekeeping than banks. Some providers (e.g., Fundbox, BlueVine) publicize relatively accessible terms for small businesses, though many still expect some minimum revenue, months in business, and at least a fair credit score. These lenders are fast and good for bridging short cash gaps, but rates and fees can be higher than bank loans. Compare effective APRs carefully. (Money)

Ideal for: businesses with short-term cash needs, recurring sales, or the ability to absorb higher fees for speed.
Watch for: rollover costs, daily/weekly payments, and merchant cash advance structures with high total cost.

5) Equipment financing — approval often based on the equipment itself

If the loan purpose is to buy equipment, equipment financing uses the equipment as collateral. Lenders are often more flexible about your credit score because the asset itself secures the loan; terms and interest vary. This is a practical route if you need a vehicle, specialized tools, or kitchen equipment and can amortize the purchase over the equipment’s useful life.

Ideal for: businesses that must buy specific machinery or vehicles.
Watch for: depreciation and the lender’s repossession rights if payments lapse.

6) Credit unions, community banks, and CDFIs — personal relationships matter

Local credit unions, community banks, and Community Development Financial Institutions (CDFIs) can be far more forgiving than national banks if you’re able to build a relationship, show community impact, or demonstrate a recovery plan. They may offer small business lines, microloans, or flexible terms geared to local entrepreneurs. These can be among the fairest options for borrowers recovering from credit issues.

Ideal for: business owners with local ties, nonprofits, and projects with community impact.
Watch for: stricter paperwork, possibly longer turnaround.

7) Secured business loans, cosigners, or owner-guarantees — trade credit risk for approval

If you have collateral (real estate, equipment) or a willing cosigner, many lenders will approve loans despite poor credit. This reduces rates compared to unsecured high-risk loans but raises personal or asset risk if the business fails.

Practical application checklist (what lenders commonly ask)

• Personal ID, Social Security/EIN, business formation docs.

• Recent bank statements (3–6 months).

• Business tax returns (if available).

• Accounts receivable or customer contracts (for factoring).

• Equipment quotes (for equipment financing) or business plan for microloans.

How to choose — quick decision rules

• Need <$15k and community support? Try Kiva or SBA microloan intermediaries. (Kiva)

• Invoicing B2B customers and need immediate cash? Compare factoring offers. (Swoop UK)

• Need fast working capital and can accept higher cost? Compare lines/short-term loans from fintechs (shop for effective APRs). (Money)

• Want lower cost long-term option and can qualify? Explore local credit unions or SBA intermediaries.

Red flags & safety tips

• High-pressure “sign now” tactics or drastically opaque fees — walk away.

• No clear APR disclosure — ask for annualized cost.

• “No-credit-check” products that charge punitive rates and prepayment penalties — read the fine print.

Steps to improve approval chances (short term & long term)

1. Get your bookkeeping in order — clean bank statements and invoices help heavy.

2. Reduce monthly burn and demonstrate steady cash flow.

3. Offer collateral or a cosigner if possible.

4. Build relationships with a local credit union or a CDFI.

5. Work on credit repair: pay down high-interest personal debt, correct reporting errors, and keep business accounts separate.