How to Acquire Business Financing with Bad Credit

Small businesses need working capital for many things such as daily operations, building their inventory, paying off old debts, remodeling or expanding. However, many business owners are faced with the challenging task of finding decent business loans for bad credit. While it is difficult to get a traditional bank loan if you have bad credit, it is not impossible and there are suitable options out there.

Bad Personal and Business Credit Criteria

Your personal credit may be judged to determine your credit worthiness even though you are applying for a business loan. If you have a FICO score of 640 or under, traditional lending institutes will deem you a credit risk. Business credit scores work on a different scale, ranging from 1-100. Bad business credit is a score 20 and under while 75 and higher is considered excellent. If you fall in between the poor and excellent credit range, a traditional lender will look to see where your number falls specifically and may use other criteria such as your personal score to make their final determination. If you cannot qualify for a traditional bank loan, you do have other options to consider.

Secured Loans

A secured loan is one that is backed by collateral. If your business is fairly successful and you feel confident enough to use it as collateral, you may be able to qualify based on the value of your business. Generally, secured bank loans carry a lower interest rate because they are considered less risky than other types of bank loans.

Merchant Cash Advance

If you have an existing business that yields a fair amount of credit card transactions, you can qualify for a merchant cash advance. Cash advances are different from loans, so they tend to have more relaxed approval requirements. The cash advance is repaid based off of your future credit card sales with a percentage of each transaction going towards repaying the advance.


Two common investors are angel investors and venture capitalists. Angel investors use their own money to back businesses in an industry with which they are familiar. Venture capitalists use other investor's funds in ventures that look they will yield a high return. Both types of investment options do require a relinquishing of part ownership to your business. Angel investors are a great option for a small business as they not only being in much needed capital, but they also bring an expanded network.

SBA Backed Loans

The Small Business Administration does not loan out money, but they will back private businesses that are deemed higher risk. The SBA guarantees the bank will get their money repaid even if you cannot pay it. This heightens your appeal as a borrower for most banks. SBA backed loans typically have the same interest rates as secured loans and carry similar terms.

There are many non-traditional options available for the small business owner that needs business loans for bad credit. The important thing to do is take your time and investigate each one carefully before deciding on the best way to acquire financing for your business.

This is a guest post by Sara Mackey

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