Bad credit business loans – all you need to know

Is bad credit holding you back from growing your business? Are you wondering how to get funding to grow or kick-start your small business? Let us walk you through how to access bad credit business loan, where to look, how to go about it and how to improve your credit score.

Bad credit history can curtail you from getting funding from most lenders and other alternative lenders. However, the drive to be a successful entrepreneur and business owner should not be crippled because of wanting credit. There are many loan options to take advantage of.



The lending market has grown tremendously in the recent years. Most lenders do not only consider personal credit score, they also factor in the financial health of the business and recent business history. There are start up loans available now for as low as a credit score of 500. Bad credit comes in levels, and for each, there is a solution out there waiting for you.

There are various methods of credit rating, most common is the FICO score, the Vantage Score model is, however, growing more and more popular. Here is a comparison of the two:

FICO credit score range

  • Excellent (800-850)
  • Very good (740-799)
  • Good (670-739)
  • Fair (580-669)
  • Poor (300-579)

Vantage Score

  • Excellent (750-850)
  • Good (700-749)
  • Fair (650-699)
  • Poor (550-649)
  • Very poor (300-549)

Getting a small business loan with bad credit

Most lenders have a minimum score in place as a requirement before issuing loans, this is mostly in the 500-600 range. There are other lenders who do not have minimum requirements in place. Such lenders focus on the strengths of the business such as annual revenue, and how long the business has been in operation. Additionally, these lenders usually avail merchant cash advance at a slightly higher interest rate, so as to cover the risk. No credit checks  always come with additional interst.

Things to keep in mind

  • Small business owners with unfavorable credit score face higher annual interest percentage and fees on the loan advance.
  • If you are in possession of unpaid client invoices, you can use them in your favor to access loans. Some lenders issue loans through invoice factoring. They base amount you qualify for on the amount of the unpaid invoice.
  • Good credit will always lead to better financing options and better terms of service, always strive to better your position

Fast business loans bad credit

Bad credit loans if you are in business for one year

If you are less than a year in business with minimal revenue, it could be difficult to secure a loan with whatever credit rating. This, however, does not mean the end of options. With a quick search online, you will easily find numerous options up to $50000 with favorable terms. These lenders base the success of the fast business loan application on the borrowers’ personal credit score, the most minimum requirement is a score of 630.
Alternatively, get a secured personal credit card first. These cards require you to deposit an amount when you open the account. Make wise decisions on how to use the card, and slowly improve your credit rating and earn back your deposit.

Fico credit score above 500?

If your personal credit score is 500 or higher, you have more options at your disposal to get loans. There are lenders willing to front up to $100000 at very favorable terms. These include but not limited to, at least $50000 annual business revenue, use a business checking or online payment platform and the business needs to be in operation for at least 3 months.
If you require a higher amount, there are lenders issuing higher amounts. What you will need is a credit score of 550, be at least one year in business and enjoy at least $200,000 in annual revenue.

A credit score above 600

If your personal credit score is 600 or higher, it automatically translates to better loans available at better terms. For instance, you could easily find lenders providing funding with a 6-month line of credit for small businesses that have been in operation for 6 months and at least $120000 in annual cash flow. For businesses that have been in operation for more than a year, getting a line of credit of 12 months is a possibility, just provide proof of at least $450,000 in annual revenue

Using your invoices to pay down your debts

If you have unpaid customer invoices turn them into immediate cash. Lenders evaluate the strength of your clients/customers, that is, how capable are they to repay, and do they pay on time. Lenders in this space issue financing differently, depending on the amount of unpaid invoice, the business history and the size of the business have been known to play a major role in deciding what amount to provide. For instance, if you are seeking less than $100000, some lenders require a fee of 7% for each invoice advance on a 12-week repayment option and a 15.7% for a 24-week option.
If you are operating a bigger business, and need more financing, options are endless. For a loan of $5 million, for instance, some lenders require a weekly fee in the range of 0.5-1% of the invoice amount. This percentage decreases significantly if the invoices are paid on time.

Still, need more information

Haven’t found where you lie? Don’t worry! There are endless options online. Do a quick search of small business loans that are ideal for business owners. There are several lists online. Before you set out to fill out loan applications, be certain that you are confident of the venture. The many options can look inviting, keep in mind it is debt and will require to be repaid. Do a thorough search of the terms on offer, ensure you understand just what you are taking on.

What type of loan works best for you?

The internet can be a jungle and information on loans with bad credit option can easily confuse someone. Pay close attention to the eligibility requirements, loan options, cost and reputation of the lender. Do not be in a rush to fill out the first application you come across.

Keeping these vital factors in mind will ensure that you get a lender who will best serve your purpose without paying a fortune in return.

What are the basic requirements for a bad credit business loan?

Basic requirements to look out for are – the minimum personal credit score, minimum years in business and the minimum annual revenue. Almost all lenders will require all three. Loan options refer to the type of loan, either a line of credit, invoice financing or term loan.

Submit your business plan

Before embarking on your search for a lender, do a thorough business plan and zero in on the type of loan you are seeking. When it comes to loan limit, look for a lender who will provide the financing you need at the best rate depending on your credit score.

Decide on your length of loan

Loan term refers to the duration availed to you as a borrower by the lender to repay the loan. If you take out a loan with a shorter length, you are bound to pay higher monthly payments as opposed to a loan for a longer period. The advantage of a short period loan is that you end up paying a lower interest amount. For individuals with bad credit, the flexibility of choice may be limited.

Stick to a bad credit lender like OakParkFinancial

Beware of loans with terms you cannot keep up with. Finally, the reputation of the lender. Ensure you get a credible lender. There are ways of verifying lender credibility online. You can read reviews of them online, and check if they are registered as lenders. Beware of scams. As the saying goes, if a deal is too good, think twice!

Loans costs to expect

Now that you have an idea of what is available to you, it is important to know what costs to expect.

  • Annual percentage rate- This is the amount charged on the loan every year. It differs from the interest rate in that APR is an all-inclusive cost (loan fees and all associated costs), not just the interest rate. If you have bad credit, your APR is bound to be higher
  • Down payment: Collateral fronted before issuance of loan. Personal guarantees are common for small businesses
  • Factor rate: Common for merchant cash advances used to decide how much the business owner will owe in interest
  • Origination fee: Cost of processing a new business loan. Most alternative lenders include this charge in the total loan balance. Depending on your credit score, this cost varies
  • Underwriting fees: This fee as stated is charged by the underwriter for review and verification of the provided information in your loan application.
  • Closing costs: Any other cost that is charged towards closing the loan, for example, filing and recording fees, loan packaging fee, business assessment or business appraisal
  • Additional fees: This includes late payment fees, prepayment fees –sometimes incurred when payments are made earlier than scheduled, and check processing fees

How to apply for a business loan

When it comes to making your application, there are a number of documents that need to be in place. To facilitate an easy, stress-free process, ensure you have the following documents ready:

  • Personal information
  • Resume
  • Business plan
  • Income tax returns
  • Loan application history
  • Bank statements
  • Collateral
  • Use of loan
  • Debt schedule
  • Legal documents

Applying for your bad credit business loan

Once you have identified your lender, simply visit their online platform. Do your application process from the convenience of your home, work, business, school or wherever you are. The process is very simple to understand and follow. Most lenders avail a step-by-step form.

This process usually takes a couple of minutes. Upon your application, lenders require you to link a bank account to provide them the opportunity of running a background check to ascertain your viability for funding. If everything works out, most lenders will notify you of a successful application within a day and have the money deposited in your account between 1-3 business days.

What is bad credit?

Bad credit is often associated with people who are perceived to have a poor history when it comes to credit and loans. Commonly, these credits accompany higher financing costs or expect you to present a collateral item or property as a form of security (your vehicle or your home for instance) in the hopes of having your loan approved.

Who do people have bad credit?

Bad credit people are the one’s who are struggling and is perceived as someone who is financially incapable of paying a loan from high street banks that often leaves them with no choice but to look for small business loans, even if it means using bad credit loans.

Why is there bad credit?

Bad credit exists due to credit scores, people who have lower credit scores are known to have the inability to pay responsibly that is why their loan application gets rejected most of the time. Credit scores are financial assessments that show the probability if you will default on a charge card or credit commitment.

Posing a risk in bad credit

Having a low credit score indicates that it’s a risk for the establishment to approve your loan application and lend you money. Due to this risk creditors will charge you a higher interest rate.

Can you get a business loan with bad credit?

Many alternatives are provided for borrowers who have a critical credit history, one of which is that lenders tend to require a minimum credit score from 500-650 , although there are some lenders who don’t require any credit scores at all.

Factors to be considered when getting a bad credit business loan

  • borrower’s annual revenue.
  • lower credit scores demand for a higher interest rate.
  • In the event that you have unpaid client solicitations, you can get prompt money through receipt calculating or financing. While banks may in any case check your FICO rating, endorsement depends mostly on the estimation of your solicitations.
  • Try to improve your personal credit rating, better rates means a higher chance to qualify for better financial options.

using bad credit to you advantage in a bad credit business loan

Let’s face it having a bad credit stings in so many ways. It costs more money than the usual loans. So how do you use bad credit into your own advantage?

1. Know your credit scores!

  • Lending companies examine your credit score and so should you. Try to assess why you have a bad credit score and see what you can do to improve it.

2. Know your limitations and capabilities as a borrower!

  • Ask how and why these limitations exist. what are your capabilities that may assert these limitations of yours?

3. Build you credit!

  • Closely examine the inner ways of the credit rating system, study the flow of the system and use it to improve your credit scores.
  • Observe and put the system’s discipline into practice, only then will you be able to use bad credit into your own advantage.

4. Monitor your annual revenue, every bit counts!

  • Monitoring your annual revenue means to keep track of every financial flow, in this way you will be able to carefully gauge the progress of your revenue and your credit scores. (this is one of the key disciplines that you must put into practice in order to enhance you credit scores and financial stability)
  • Continually update your credit scores.

5. Financial progress!

  • Means that you are now more qualified for better loan options.
  • Lenders will no longer see you as a risk borrower, the chances of bad credit will diminish by each progress.
  • You’ll be saved from unnecessary high interest rates.

OakPark can help you with your bad credit business loans

Lastly learn from your bad credit experience, always hope for a silver lining and a pot of gold at the end of the rainbow. Having a bad credit may not be that bad at all you just need to find the right lender for you. (insert loan company) ex. Here is where Oak Park Financial comes to the rescue, we’ll give you the credit you need, the chance to start and grow your own business. We are willing to take the risk, are you?

Are you ready? Apply now for your business loans

Don’t strain any further, don’t lose sleep anymore, you now know where to start. Be sure of what you need, find an appropriate lender, and fill out an application form today!

Copyright © 2020 Oakpark | All Rights Reserved