How to Get a Business Loan with Bad Credit (2025 Guide)

Introduction: Can You Really Get a Business Loan with Bad Credit?

Let’s be real — getting a business loan when you have bad credit can feel like trying to climb a mountain… in flip-flops. Most lenders are skeptical when they see a low credit score. But does that mean you’re out of options? Absolutely not.

Bad credit isn’t a full-stop; it’s just a speed bump. Whether your score took a hit due to personal financial hiccups or business setbacks, the truth is — there are ways to secure funding and keep your business dreams alive.

In this guide, we’ll walk you through practical steps, loan types, credit score hacks, and smart strategies to improve your chances of getting that much-needed business loan — even with a low score.

Can You Get a Business Loan with Bad Credit? Yes — Here’s How

Here’s the deal: lenders see bad credit as risky. But you can offset that risk using the right tactics.

1. Offer Collateral

If you can’t offer a high credit score, offer high value — through collateral. This could be:

• Business equipment
• Real estate
• Inventory
• Vehicles

Collateral makes the lender feel safer, and in return, you might get lower interest rates or even larger loan amounts.

💬 Our Take: If your business owns any valuable asset, use it smartly to negotiate a better loan deal.

2. Prepare a Killer Business Plan

Your credit score tells lenders how you’ve handled money in the past. Your business plan shows them how you’ll make money in the future.

Your plan should include:

• Financial projections
• Market analysis
• Revenue streams
• Cost structure
• Business goals

A solid, well-researched business plan can turn a “maybe” into a “yes.”

3. Add a Co-Applicant or Guarantor

This strategy is simple but powerful: bring someone with good credit onto your application. It could be:

• Your spouse
• A business partner
• A friend or investor

Their good credit can back you up and reduce lender anxiety.

💬 Tip: Just make sure your co-applicant understands the risks and responsibilities involved.

4. Choose the Right Type of Loan

Some loans are designed for people with bad credit. Here are a few to look out for:

💬 Our Review: Equipment financing is the easiest win if you need to buy tools or machines — it comes with built-in collateral.

5. Improve Your Credit While You Apply

Just because you’re applying doesn’t mean you can’t simultaneously improve your score. Some quick fixes:

• Pay off outstanding debts
• Lower your credit card usage
• Dispute incorrect data in your credit report
• Avoid applying for multiple loans at once

We’ll dive deeper into credit-boosting tricks later in this article.

6. Shop Around Like a Pro

Different lenders = different rules. Don’t stick to just one bank.

Try:

• NBFCs (Non-Banking Financial Companies)
• Fintech lenders like LendingKart, Fundbox, BlueVine
• Peer-to-peer platforms like Faircent or Prosper

💬 Pro Tip: Some lenders accept scores as low as 550, especially if your business is stable or you offer collateral.

7. Show Business Stability

If your credit score is shaky, show them your business is rock-solid:

• Consistent revenue?
• Been running for a few years?
• Loyal customer base?

Lenders love to see predictable income and smart cash management. Share bank statements, balance sheets, and even GST filings (if applicable).

8. Explore Alternative Financing

Can’t get a traditional loan? No worries.

Try these:

• Business credit cards
• Overdrafts or line of credit
• Invoice financing
• Microloans
• Government schemes (like PMMY in India or SBA microloans in the U.S.)

💬 Editor’s Pick: For new or seasonal businesses, business credit cards with 0% APR offers are a great short-term solution.

Understanding Credit Scores: What’s Considered “Bad”?

In most cases:

• Above 750 = Excellent
• 650–749 = Good
• 600–649 = Fair
• Below 600 = Poor

Yes, below 600 can make loan approval tricky — but not impossible, especially if you’re strong in other areas like collateral or cash flow.

Must Read: Best Cloud Storage Solutions for Businesses in 2025

SBA Loans — A Lifeline for Bad Credit (U.S. Specific)

The Small Business Administration (SBA) doesn’t lend money directly — but it guarantees loans through partner lenders. This makes it less risky for banks to lend to you, even with bad credit.

Perks of SBA Loans:

• Lower interest rates
• Flexible credit score requirements
• Long repayment terms
• Sometimes, no collateral required

You’ll need to:

• Show ability to repay
• Have a solid business purpose
• Be a legally registered U.S. business

💬 Our Review: SBA 7(a) and Microloan programs are a goldmine if you qualify. Just be ready for paperwork and wait times.

How to Improve Your Credit Score Quickly (Before or During Application)

Don’t wait for miracles — just take action. Here’s what to do:

✅ Pay Bills and EMIs on Time

Set up auto-payments or reminders. This is the #1 credit-boosting factor.

✅ Reduce Outstanding Debt

Pay off high-interest debts first. Lower utilization = higher credit score.

✅ Keep Utilization Under 30%

Using ₹30,000 on a ₹1,00,000 limit? That’s fine. ₹80,000? That’s bad.

✅ Avoid Multiple Loan Applications

Each one leaves a “hard inquiry” that lowers your score temporarily.

✅ Check Your Credit Report for Errors

Request reports from CIBIL, Experian, Equifax. Fix errors to boost your score.

✅ Use a Healthy Mix of Credit

A balance of secured (home/car loan) and unsecured (credit cards) credit helps.

✅ Keep Old Credit Accounts Open

Long credit history = more trust.

✅ Use Your Business Bank Account Consistently

Regular deposits and low overdrafts show financial health to lenders.

My Final Thoughts (and Some Real Talk)

Getting a business loan with bad credit isn’t easy — but it’s far from impossible. It just means playing smart and giving lenders the confidence they need.

If your business is solid, your plan is tight, and you’re actively improving your credit — you’re in a better place than you think.

My suggestion? Start small, start smart. Use a short-term loan or equipment financing to build credibility. Then move up to larger funding as your credit improves.

Also Read: How to Trade Stocks Online for Beginners

Conclusion: Don’t Let a Low Credit Score Kill Your Business Dreams

Look — bad credit happens. Whether it’s a failed venture, a medical emergency, or plain ol’ bad luck, you’re not alone.

But remember:

✅ Collateral speaks louder than credit
✅ A great business plan can outweigh your past
✅ Alternative lenders are way more flexible than banks
✅ Your credit score can improve faster than you think

So don’t wait for your score to become perfect. Start exploring your options today — and take that step toward building (or rebuilding) your business empire.

📌 Quick Summary Table