How to Get a Business Loan With Bad Credit

Updated June 2026

Bad credit closes some doors. It does not close all of them. The key is matching the product to the situation. Before applying, it helps to know what each lender category requires and how rates scale with credit score. The lower your FICO, the more important the product choice becomes.

What counts as bad credit for a business loan

Credit scoring is not standardized across business lenders, but the rough breakpoints look like this:

• Excellent. 750+. Best rates available, full lender menu.
• Good. 700 to 749. SBA, bank, and online lenders all approve.
• Fair. 660 to 699. SBA still possible. Most online lenders approve.
• Below average. 620 to 659. Bank loans difficult. Online lenders still available.
• Bad. 580 to 619. Equipment financing, MCAs, and revenue-based products are the main options.
• Very poor. Below 580. MCAs and microloans are usually the only realistic options.

Options available below 600 FICO

Sources: SBA Microloan Program Performance Report, Federal Reserve Banks' 2024 Small Business Credit Survey, Equipment Leasing and Finance Association Monthly Index, and CDFI Fund disclosures, June 2026.

Equipment financing: the easiest bad-credit option

Equipment financing is the most credit-friendly small business product. The equipment itself secures the loan, which means the lender can repossess and resell if you default. That security shifts most of the underwriting risk away from your FICO score.

The Equipment Leasing and Finance Association tracks monthly origination volumes and consistently reports that equipment financing approvals run higher than other commercial credit categories. Lenders care more about the resale value of the asset than the credit profile of the borrower.

• What you need. A specific piece of equipment to purchase, basic business documentation, and a personal guarantee.
• What it costs. 10% to 30% APR, depending on equipment type and credit profile.
• Trade-off. The equipment is collateral. Default means losing it.

CDFI loans: the underused option

Community Development Financial Institutions (CDFIs) are non-profit lenders certified by the US Treasury to serve underserved markets. They lend to borrowers most banks turn away, often at rates below what online lenders charge. The Treasury Department's CDFI Fund publishes a searchable directory of certified CDFIs by state.

Brett Theodos at the Urban Institute has published multiple reports showing that CDFI borrowers often access better pricing than they would qualify for at conventional online lenders. The catch: CDFIs have limited capital and longer underwriting cycles. Apply early.

SBA Microloans: small but cheap

The SBA Microloan program lends up to $50,000 through intermediary non-profit lenders. The SBA reports an average microloan size of around $13,000 to $15,000. Rates run 8% to 13%, well below online lender pricing.

Microloan intermediaries set their own credit requirements. Some accept FICO scores as low as 620. Most require a business plan, character references, and willingness to participate in technical assistance programs.

What to avoid if your credit is low

• Stacked MCAs. Taking a second MCA to pay the first is the fastest path to business failure. See how MCA pricing actually works before committing.
• Personal credit cards for business use. Mixes personal and business credit, raises personal utilization, and damages future borrowing capacity.
• Lenders that do not disclose APR. If a lender cannot give you a clear annualized cost, walk away.
• Brokers charging upfront fees. Legitimate lenders deduct fees at closing, not before approval.

How to improve credit before applying

If you can wait 60 to 120 days, a credit improvement sprint often pays for itself many times over in better loan terms:

1. Pull all three credit reports. Free at AnnualCreditReport.com. Look for errors and dispute them. A successful dispute can raise scores 20 to 60 points within 30 to 60 days.
2. Pay down revolving balances. Bringing credit card utilization below 30% lifts scores meaningfully.
3. Avoid new credit applications. Each hard pull lowers FICO by 3 to 10 points. See how credit pulls work during a business loan application.
4. Bring delinquent accounts current. A single 30-day late payment can drop a score 60 to 100 points. Catching up reverses much of that damage over time.
5. Wait for new accounts to age. Average account age is a meaningful FICO input. Patience often beats action.

Common questions

Can I get a business loan with a 500 credit score?

Yes, but the menu is limited. Merchant cash advances, revenue-based financing, and some equipment lenders approve down to 500. Expect high rates and short terms.

Will a business loan help my credit?

Most business loans do not report to personal credit bureaus, so they have no direct effect on your personal FICO. SBA loans and a few bank loans do report. Business credit bureaus (D&B, Experian Business) report most business loans regardless.

What about a co-signer?

A co-signer with strong credit can substantially improve your terms. The co-signer accepts the same liability as you do, which is why most family members and friends should think hard before signing.

Are bad-credit business loans a scam?

Most are legitimate. Watch for red flags: upfront fees, no APR disclosure, pressure to sign immediately, and lenders that refuse to send written terms. Legitimate lenders disclose all costs in writing before you sign.