Skip to content

Is It Possible to Get a Business Loan for a New Startup With Bad Credit?

Have you recently launched a new small business? If so, you’re probably aware that startup costs are expensive, and that they only continue to rise. Virtually every new business comes with at least a few initial expenses. Even if you just need to cover an upgraded laptop and government filing fees to incorporate, you can expect to incur at least some upfront costs whenever you start a new business.

As you create your new small business, the more upfront capital you have, the better off you’ll be. However, with that mentioned, accessing suitable funds for your upstart can be challenging if you have a poor credit history. Fortunately, banks do make business loans for bad credit.

This type of financing typically requires you to pledge an acceptable level of collateral before securing the loan. In addition, borrowers with a poor payment history should expect to pay higher lending fees than they would if they had A credit.

How difficult is it to get a business loan with low credit scores?

How difficult is it to get a business loan with low credit scores?

Applying for poor credit business loans as a startup can be a challenge. The difficulties you can anticipate during the application process are largely driven by your credit score and the appraised value of any personal assets you’re willing to pledge as collateral. FICO scores range from 350 to 850.

Creditors typically regard anything below 500 as poor credit, while they consider scores of 720 and above to reflect a positive payment history. Although, you may encounter some exceptions to this rule.

Occasionally, business lenders, depending on the financing terms, may look for scores even higher than 720. Generally speaking, however, if your score falls within the 700 to 800 range, you’ll likely have a good chance at approval for a low-cost business loan with favorable repayment terms.

If you show poor credit but have been operating your business long enough to evidence tangible assets or any debts owed to the company, you should explore your options for accounts receivable financing (AR) or invoice financing. This option uses your unpaid invoices as collateral in exchange for a business loan disbursed in one lump sum.

Most often, under invoice financing, the creditor gives you 80% of the invoice value while collecting payments on your behalf until the outstanding balance is fully paid. AR financing is hardly your only option for business loan financing, however. Meeting other important requirements may still get you approved. Let’s cover some of these options in more detail below.


What are the options for obtaining a business loan with bad credit?

If your personal FICO score is low, and you haven’t been in business long enough to establish a business credit score, a few options still exist for obtaining startup financing. These choices may include funding strategies that don’t require collateral or a loan application, such as personal savings, private investors, and even web-based platforms like GoFundMe and Kickstarter.

With that aside, if you’ve recently looked at your credit, and know it’s at least above 500, you may still have options in the alternative business lending sphere. Exploring your loan options backed by the US Small Business Administration (SBA) is always a reliable starting point.

You can apply for government-backed SBA 7(a) loans, 504 loans, and microloans through an SBA-approved lender. The program is somewhat similar to the FHA lending platform for housing because it’s not as credit-score-driven as other business financing options. Nevertheless, in most cases, the SBA lenders look for a FICO score of 640 or higher.

If the SBA isn’t right for your situation, New Bridge Merchant Capital offers other alternative financing platforms, including business lines of credit and term loans that come with a diverse range of loan amounts and repayment options. Once approved, your business can access the funds after a minimal processing period. If your current credit score is too low to align with our underwriting guidelines, we’ll offer recommendations on how to raise your score and establish a favorable business credit profile.

Small business loans for bad credit and other financing solutions that don’t rely on personal FICO scores are constantly emerging. If, for some reason, your profile fails to meet our requirements, we’ll help broaden your search to include some potential alternatives that can get your credit back on the right track.


Getting your startup business loan approved with bad credit

The best strategy for finding a business loan approval with less-than-perfect credit is to get your credit score up to 680 before you start seriously shopping for business loans. If you’re unsure what your credit score is, FTC lending laws allow you to check your FICO score for free in a soft pull once a year.

Alternatively, you can always schedule a phone call with a business lending specialist at New Bridge Merchant Capital to discuss your financing options. Excessive hard credit pulls or asking lenders to run your credit at random can impact your score negatively. It is, therefore, critical that you speak with a finance professional before you do.

Some personal banking and credit monitoring services offer tools that keep a running tap on your credit. Take advantage of these if possible. If you know you don’t qualify for a particular loan product, hold off on the application process until you’re sure you are.

Owning valuable assets improves your chances of being approved for a poor credit business loan. You may have an opportunity to leverage your holdings as collateral. In almost every circumstance, however, you’ll need to meet additional requirements, and most creditors like to see roughly six months of seasoning on the business itself.


How to get started with a poor credit business loan application now

Whenever you apply for a business loan with a low credit score, entering the application process with a detailed business plan goes a long way in obtaining your approval. Taking the necessary steps to improve your personal and business credit profiles before applying is crucial.

The downside of seeking business loans for bad credit with a poor FICO is that it almost always entails higher borrowing costs. Poor credit business loans, however, represent one of the best paths to reestablishing your payment history so you can start enjoying the benefits of a strong credit profile again.

To learn if you qualify for the diverse range of alternative business lending products from New Bridge Merchant Capital, connect with one of our senior business credit specialists by dialing 844-228-0593 or get started online now.

Work With a Leading Commercial Lender

At NewBridge Capital Solutions, our loan products can help businesses of all sizes. With our exceptional customer service and reputable funding, we have become a trusted leader in the commercial finance industry. If you want to apply for a term loan that can provide working capital for your business, make sure to contact us.
Skip to content