How to Get a Small Business Loan With Bad Credit

The fact remains that it’s harder for smaller businesses–even those with stellar credit ratings–to get traditional bank loans than it is for larger businesses. Over 63% of business owners attempting to find funding say they most often targeted banks. The success among these respondents of actually getting a small business loan was a low 27%, reports SBA.

Unfortunately, bad credit–which is defined by FICO as a score of 300 to 629–currently plagues a large percentage of small business owners, as a result of the financial crisis several years back. One way entrepreneurs can overcome the stigma of poor credit is to apply for revenue-based loans, which are based on regular monthly bank deposits, according to Marco Carbajo, founder of the Business Credit Insider’s Circle.

Revenue Based Loans


Typically a business owner can get a business loan equal to 10% of the annual gross deposits, regardless of having bad credit, notes Carbajo. If your business makes at least $12,500 per month in revenue (or $150,000 per year), then you could be eligible for a revenue-based loan with funding granted within seven business days.

OnDeck is an online small business lender in the U.S., issuing over $5 billion in loans and trusted by over 50,000 small businesses. It provides funding in as fast as one business day. You must have at least $100,000 in annual revenue and have been in business for at least one year.

OnDeck works with small businesses that have annual revenue from $100,000 to $5 million, including doctors, dentists, restaurants, auto body shops, and beauty salons. However, the company doesn’t work with certain businesses, including funeral services, tax preparation services, and attorneys.

You can borrow anywhere from $5,000 to $500,000, with a 2.5% origination fee and interest rate at 5.99%. You apply for up to $1,000,000 in a line of credit, with an interest rate around 13.99%.

For Credit Scores Under 500


With a personal credit score of at least 500 or 530, you could qualify for OnDeck. The lender reports payment activity to the three credit bureaus, so paying off your loan on time will help build your credit score.

While the average customer is in good to strong credit standing, Kabbage looks at factors beyond credit score, namely the health of the business.  Kabbage customers must be in business for over one year, and have annual revenue of $50,000.

Kabbage provides a line of credit (via partnership with federally insured Industrial Bank). You can borrow anywhere from $2,000 up to $100,000. Kabbage’s fast, flexible business line of credit is always available. Borrowers can draw against their line as often as once a day for anything that they need.

Kabbage allows you to borrow money for six months or 12 months, so if you borrow $50,000, you have to pay that entire sum back (plus interest) within the time frame.  Fees are 1%—13.5% of the loan amount the first two months, and 1% for each of the remaining four months. One-sixth of the total loan amount, plus the monthly fee, is paid every month.