Running a small business is a challenging process and being low on credit score or having bad credit score makes the situation worse. It’s been quite difficult to secure any type of funding from traditional lenders if you are experiencing bad credit problems. Experian, a consumer credit reporting agency, reveals its credit score criteria. According to their credit score criteria, borrowers with 300-579 credit score are considered bad credit.

Credit Score Criteria

  • Exceptional Credit Score: 800-850
  • Very Good Credit Score: 740-790
  • Good Credit Score: 670-739
  • Fair Credit Score: 580-669
  • Poor Credit Score: 300-579

Source: Experian

Causes of Bad Credit

  • Making Late Payments
  • Defaulting on Payments
  • Charge off Penalty
  • Defaulting on a Loan
  • Filing Bankruptcy
  • Foreclosure
  • Judgments


Bad Credit Business Loans

Bad credit business loan is a business funding program that is especially made for businesses experiencing bad credit problems. These are also considered as high risk loans and carries somewhat higher interest rates, with some other charges. With this type of funding, you can improve or build your credit rating.

How to Get a Bad Credit Business Loan?

As the traditional lenders are no more a funding option for bad credit borrowers, they turned to alternative lenders. They are more willing to offering funding to borrowers with spotty credit history. Applying for a business loan with bad credit at alternative lender requires almost 650 credit score. Their focus is normally on your business strength other than your credit history. That is why getting a bad credit business loan from alternative lender is quite simple and easy rather than getting from traditional banks.

Bad Credit Business Loan Factors

  • Credit
  • Industry
  • Debt Load
  • Time in Business
  • Collateral
  • Cash flow

General Uses of Bad Credit Business Loan

  • Investing in Cash Flow
  • Pay Bills
  • Payroll
  • Repair Damaged Equipment
  • Inventory Purchase
  • Taxes

Advantages of Bad Credit Business Loans

For businesses experiencing bad credit problems, these loans are rescuer. Other than funding, there are some advantages of these loans that can additionally help your business.

Credit Scores: Credit score of every range is approved for bad credit business loans.

Paperwork: Only basic information is required.

Help You In Improving Credit: Bad credit business loans can also help you to improve your bad credit score, by making timely payments.

Disadvantages of Bad Credit Business Loans

In business world everything is connected, therefore, where there is good sides of these loans, there are also some bad sides as well.

Interest Rates: Bad credit business loans have higher interest rates.

Repayment Term: The repayment term on bad credit business loan is somewhat shorter than the traditional loans.

Personal Guarantee: For getting a bad credit business loan, you need to provide guarantee as these loans are considered high risk loans.

List of Documents Required for Application

  • Driver’s License
  • Business License
  • Bank Statements
  • Ownership and Registration Documents
  • Business Property Lease Agreement
  • Tax Returns (Both Business and Personal)
  • Balance Sheet
  • Profit and Loss Statement of last few years

Alternative Bad Credit Loans

Here are three of the most common bad credit alternative loans;

Merchant Cash Advances

Merchant cash advance is somewhat expensive alternative to bad credit business loans. These cash advances involves a quick lending process and can be obtained in just a couple of days. There is no collateral or personal guarantee requirement for cash advances. Cash advances are offered in exchange of your daily credit/debit card sales, in which the lender deduct a small percentage from the daily sales of business. It’s fast process and easy repayment makes it easy option for bad credit borrowers.

Invoice Factoring

Businesses that are invoicing to their clients know the frustration of delayed payments very well. Invoice factoring also known as accounts receivable financing is a funding program for this situation. With invoice factoring, you can get the funding to cover the expense cycle. It is also a favorable funding choice for bad credit businesses.

Equipment Financing

Equipment financing is another best alternative for bad credit business loans. It is specifically designed to fund the equipment purchase for your small business. This equipment can be anything ranging from car, loaders and machinery.

Small Business Financing News │ Merchant Advisors | blog
A Complete Guide on Bad Credit Business Loans and Alternatives
A Complete Guide on Bad Credit Business Loans and Alternatives
Looking for funding to fund your small business? The road ahead is full of twists and turns because it does require a lot of time and research to locate the best funding program that suits your business. Due to theRead more
If you have a bad credit and can't qualify for a business loan, here are a many alternative options available that might get you bad credit business loans.
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Merchant Advisors