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Best Startup Business Loans for Bad Credit of December 2021

Startup business loans are available if you have bad credit, but shop carefully to keep costs in line.
Ryan LaneApril 29, 2021
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Online lenders offer startup business loans for bad credit, but they can be expensive. Make sure your new business can handle the potential costs of any debt before taking it on.
To overcome poor credit and get funding, startups will need a track record of success — even if it’s only a few months. Reputable lenders won’t offer guaranteed approval.
Here are startup business loans for bad credit (a FICO score below 630), as well as alternatives if you can’t qualify for a small-business loan until your company grows.

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Our pick for

New businesses with unpaid invoices

If you have a B2B startup with bad credit, you can turn unpaid invoices from customers into working capital with invoice factoring from BlueVine. At least three months in business is required to qualify.

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BlueVine - Invoice factoring

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Est. APR

15.00-68.00%

Min. Credit Score

530

Speed to Funding

As fast as 1 day

BlueVine's invoice factoring can turn unpaid customer invoices into fast cash.

Pros

  • Finances larger invoices.
  • Cash can be available within the same day.
  • Accepts low minimum credit score and short time in business.

Cons

  • Not for businesses that do not invoice on net terms.
  • Loan amount is tied to the value of your invoices.
  • Dependency on customers to pay their bills on time.
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Qualifications:

  • Minimum credit score: 530.
  • Minimum time in business: 3 months.
  • Minimum annual revenue: $120,000.
Lowest credit score required

Our pick for

Startups with at least six months in business

Fundbox offers business lines of credit if your personal credit score is at least 600. You must also have two months of activity in Fundbox-supported accounting software or three months of transactions in a business bank account to qualify.

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Fundbox - Line of credit

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Est. APR

10.10-79.80%

Min. Credit Score

600

Speed to Funding

As fast as 1 day

Fundbox offers a business line of credit to fill a cash-flow gap, and qualifying is easier than with other lenders.

Pros

  • Cash can be available by the next day.
  • Low minimum credit score requirement.

Cons

  • Rates are high compared to traditional banks.
Read full review

Qualifications:

  • Minimum credit score: 600.
  • Minimum time in business: 6 months.
  • Minimum annual revenue: $100,000.
May fund quickly

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Summary of Best Startup Business Loans for Bad Credit of December 2021

LenderBest ForEst. APRMin. Credit ScoreSpeed to FundingNext Steps

BlueVine - Invoice factoring

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Best for New businesses with unpaid invoices15.00-68.00%530As fast as 1 day
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Fundbox - Line of credit

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Best for Startups with at least six months in business10.10-79.80%600As fast as 1 day
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Can you get a startup business loan with bad credit?

It’s possible to get a startup business loan with bad credit, but options will be limited — and potentially costly. Here are a few things to note about bad credit business loans:
  • You likely won’t qualify for bank or government loans. These typically have the most favorable terms but come with strict minimum qualifications for credit scores and years in business. For example, you’ll likely need to be in business for at least a year to get a bank small-business loan, and loans backed by the U.S. Small Business Administration will require a good credit score (at least 690).
  • Alternative loans are available, but they cost more. Online lenders may offer startup business loans to companies less than a year old or those whose owners have lower credit scores. But because of that risky lending profile, you’ll likely pay more — annual percentage rates can reach 99%. Your startup will also need to be generating income already. For example, invoice factoring from BlueVine requires at least $10,000 in monthly revenue to qualify.
  • CDFIs may offer competitive rates — if you qualify. Community Development Financial Institutions, or CDFIs, receive funding to help underserved communities. Startups that lack resources, opportunity or financial access may be able to get a business loan from a CDFI, even with bad credit. But approvals can take time, so your company will need to be able to wait for funding.
  • Microlenders may cover smaller amounts. Similar to CDFIs, microlenders focus on providing capital to disadvantaged individuals, such as minority business owners, who may be underbanked and have insufficient credit. If you qualify, a microloan can be a good choice for bad credit startups with small funding gaps. Loans are usually $50,000 or less.
Be wary of any lender that advertises guaranteed approval or startup loans with no credit check. At best, those may be expensive products. At worst, they could signal predatory lenders that will potentially hurt your new company more than help it.

Types of bad credit startup business loans

Startups with bad credit will likely be limited to online lenders. But those lenders may offer multiple types of business loans to choose from, including:
  • Business lines of credit. These are a flexible way to fund your startup, allowing you to take out cash as needed up to a borrowing limit.
  • Invoice factoring or financing. If you’re running a B2B company, you may be able to access unpaid customer invoices earlier by selling them to a third party (“factoring”) or borrowing against their value (“invoice financing”).
  • Personal business loans. If your startup isn’t eligible for any form of financing, you could consider a personal loan. These loans are credit-dependent, but options are available for borrowers with bad credit.
  • Business credit cards. If your credit is at the high end of what’s considered a bad score (below 630), you may be able to qualify for a business credit card.
  • Merchant cash advances. Lenders provide a lump sum that you pay back daily or weekly. Because of their effect on cash flow and high costs (APRs can reach 350%), merchant cash advances should typically be a last resort.
Improving your credit can unlock additional financing options like SBA loans as your company grows. Ways to build credit include paying down debt and fixing mistakes in your credit report. Startups can also look to build business credit through actions like updating business information and uploading financial statements to business credit bureaus.

Alternatives for bad credit borrowers

Small-business financing that doesn’t require debt may be a better short-term fit for some startups with bad credit. These options can include:
  • Applying for small-business grants.
  • Selling equity, or shares of your business, to investors, friends or family.
  • Using a crowdfunding platform to raise money.

Compare more small-business loan options

If none of the loans included here works for you, or if you’d like to compare loan options, NerdWallet has a list of small-business loans that are best for business owners. All of our recommendations are based on the lender’s market scope and track record and on the needs of business owners, as well as rates and other factors, so you can make the right financing decision.
Last updated on April 29, 2021

To recap our selections...

Best Startup Business Loans for Bad Credit of December 2021

Frequently Asked Questions

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