Key takeaways
- Many lenders state their credit score requirements, helping you narrow down small business loans for bad credit
- Some loans focus less on your business credit history and more on future sales or revenue from invoices
- Offering assets or collateral can make you less risky and improve your chances of approval with the lender
Good news: having a credit score of 500 doesn’t make getting a business loan impossible. But since that score is considered poor, you will need to look for bad credit business loans. You should also be prepared for higher borrowing costs, including higher interest rates than lenders would extend to strong credit borrowers.
To find the best business loan for a 500 credit score, compare multiple lenders and financing offers, including these seven small business loans.
Compare the best small business loans for a 500 credit score
| Lender | Best for | Min. credit score | Bankrate score |
|---|---|---|---|
| SBA microloans | Affordable business loans | No credit requirement | N/A |
| Fundible | Low revenue requirement | 450 | 4.7 |
| Fora Financial | Fast business loans | 500 | 4.6 |
| Bank of America | Credit-building line of credit | Not stated | 4.3 |
| Kiva | Crowdfunding | Doesn’t check credit | 4.3 |
| PayPal | No-credit-check business loan | None for working capital loans | 4.2 |
| Uncapped | Revenue-based funding | Relies on other business factors | 4.1 |
SBA microloans: Best for affordable business loans
SBA microloans are government small business loans designed to support businesses commonly pressed out of traditional lending. These loans are known for their small loan sizes, up to $50,000, with SBA interest rates for microloans usually falling between 8 percent and 13 percent. These features are offered in hopes of providing manageable loan payments to disadvantaged businesses. This type of SBA loan also nixes the guarantee fee that most other SBA loans require.
You can find SBA microloans through approved microlenders, usually nonprofits dedicated to seeing small businesses grow and using loans and education to do so. But like most types of SBA loans, the cost of affordability is that it can take 30 to 90 days to complete the funding process.
SBA microloans tend to relax eligibility requirements. Some microlenders like Accompany Capital even take credit requirements out of the equation. Common requirements for an SBA microloan:<br /><br />
- Personal credit scores of around 500
- Detailed business plan
- Collateral or personal guarantee is often required
Fundible: Best for low revenue requirement
Fundible offers the best blend of online business lending and leniency toward credit and revenue. It’s capable of handling a variety of small business needs, accepting revenue levels as low as $96,000 per year. Loans offered with this revenue minimum include equipment financing, bridge loans and invoice financing.
Along with relaxed revenue, a Fundible representative stated that the fintech lender works with business owners whose credit scores have dipped to 450. Officially, all three of these business loans need at least a 500 personal credit score, as per the website.
Fundible also offers a business line of credit for business owners with personal credit scores of 580 and above. But this loan has a taller order for revenue, wanting at least $200,000 per year.
The requirements vary depending on which small business loan you opt for through Fundible. But its minimum standards to apply are:<br /><br />
- At least a 450 personal credit score
- 6 months in business
- $96,000 in annual revenue
Fora Financial: Best for fast business loans
Fora Financial stands apart as an online lender granting high-dollar business loans within 72 hours or less. Small business owners can choose between a short-term working capital loan or revenue advance, which is the equivalent of a merchant cash advance. Both loans offer wide-spanning loans starting at $5,000 and going all the way up to $1.5 million and have repayment terms of up to 16 months.
You can find online lenders able to finalize approvals more quickly within 24 hours, while traditional banks might take weeks to approve business loans. Fora Financial rests in between these funding timelines, blending the best of both worlds. It gives the chance at small or large business loans with the relaxed lending requirements typical of online lenders.
Fora Financial gives many business owners the opportunity to get the funding they need, even with less-than-stellar credit. Its minimum requirements include:<br /><br />
- $10,000 in average monthly revenue for the past 3 months
- 500 personal credit score
- 3 months in business
Bank of America: Best for credit-building line of credit
Bank of America’s lineup includes a variety of business loans built for different needs, from revolving loans to one-time term loans for designated purposes. Its cash-secured business line of credit is one of its most unique loans.
The credit line offers limits starting at $1,000 and lets you open it with a $1,000 deposit, acting as the available credit to draw from. This allows you to build business credit. Over time, Bank of America may even graduate your business to its standard unsecured business line of credit.
The credit-building line is Bank of America’s most lenient business loan option. Its requirements include:<br /><br />
- $50,000 in annual revenue
- Under 2 years in business
- $1,000 security deposit
Kiva: Best for crowdfunding
Kiva is an ideal lender for borrowers with subprime credit because of its nontraditional blend of crowdfunding and peer-to-peer lending. Small business owners start by reaching out to their network of family and friends to fund their projects for a timeline of 15 days or less. This can take some time, but Kiva is one of the few ways a small business owner can get a business loan with no revenue requirement.
Once the private funding is over, business owners can publicize their financing needs to Kiva’s network of over 1.9 million lenders. Unlike traditional loans, Kiva business loans don’t charge any interest or loan fees. Kiva works best for microloans of $15,000 or under.
Kiva is light on the traditional eligibility requirements, relying instead on social credit — or character — of the business owner to repay the loan. Its main requirements to apply:<br /><br />
- Must be 18 years old or older
- Must use funds for business purposes
- Must not be in foreclosure or bankruptcy or have current liens
PayPal: Best for no-credit-check business loan
PayPal presents an exclusive business loan offer to small businesses that already use its payment processing platform. PayPal merchants can either choose their working capital loan or short-term loan, both relaxed enough to accept poor credit.
A PayPal working capital loan is a no-credit-check business loanavailable to businesses that bring in PayPal sales. This loan works like a merchant cash advance, taking a percentage of your business sales until the loan is repaid.
Loan terms are flexible. With the PayPal business loan, you to repay the business loan in 17 to 52 weeks. With the working capital loan, you choose a repayment plan that tells PayPal what percentage of sales get applied toward the loan.
While you can easily apply online and get funded in minutes, you need to meet some minimums to get approved:<br /><br />
- Must have a PayPal business account
- Working capital loan: No credit score requirement
- Business loan: 580 personal credit score
- Working capital loan: $15,000 in PayPal sales for a Business account or $20,000 for a Premier account
- Business loan: At least $33,300 in annual revenue
Uncapped: Best for revenue-based funding
Uncapped offers revenue-based funding through online lending. Upon applying, you’ll connect your business bank account to the fintech lender to assess your current and future revenue. It can then fund business loans anywhere from $10,000 to $10 million.
You can either repay as a percentage of your sales or a fixed payment. These revenue-based loans assess a one-time fee called a base fee, charged as a percentage of the entire loan. Uncapped also offers a runway loan for SaaS startups with six months in business looking to extend their runway for business growth.
Uncapped requires a high level of revenue to be eligible for its loans. Its requirements include:<br /><br />
- $100,000 in monthly sales, or $1.2 million annually
- Amazon sellers need just $10,000 in monthly revenue
- At least 6 months in business
- Must be in an approved industry: SaaS, e-commerce, direct-to-customer or subscription-based businesses
How much loan can I get with a 500 credit score?
The small business loan amount you can qualify for depends on more than just your credit score. Depending on your revenue and how long you’ve been generating a positive cash flow, you may be able to secure a business loan for $250,000 or higher, even with bad credit.
The type of business loan you want will also play a role. SBA microlenders offer loans of up to $50,000, and some have no credit score requirement. Many small business owners with bad credit and who need equipment can get business loans for $100,000 or more since the equipment acts as collateral. Research lenders and their eligibility requirements to see if you can qualify.
How to choose a small business loan for a 500 credit score
A small business owner with a 500 credit score will need to find the right lender and do the extra groundwork when applying for credit. Taking these steps may boost the odds of approval:
Know your credit score
If you know you have bad credit, it’s best to check your exact credit score to know your benchmark when applying for business loans. Most lenders set minimum credit requirements to get approved for a bad credit business loan.
For a business loan credit score, the lender may look at your personal or business credit history. You can establish business credit by working with vendors that offer trade credit or by paying for expenses with a business credit card. Bankrate insight The best business credit cards are unsecured but require good-to-excellent credit. For business owners with bad credit, a secured business credit card requires a cash deposit but can help you build business credit over time.
Find the right type of business loan for bad credit
Getting approved for a business loan may come down to picking the right type of business loan for bad credit. Any assets or collateral you have could help your case — lenders will see your business as less of a risk since you’re putting more on the line. Types of business loans to consider:
- Short-term loan: A loan with short repayment terms, often for two years or less, with limited loan amounts
- Business line of credit: Reusable credit that, once approved, you can draw from at any time
- Microloan: A small loan offered as a conventional, alternative or SBA loan; SBA loans allow borrowing up to $50,000
- Invoice financing: Financing approved based on a percentage of your outstanding invoices and repaid once the invoices are settled
- Merchant cash advance: Financing approved based on future debit or credit card sales and either repaid from a percentage of sales or, less commonly, as a fixed payment
Shop around: Compare eligibility requirements and costs
Once you know your funding needs and you’ve narrowed down financing options, you can look for the best bad credit business loans available. Your goal is to find the offer with the lowest interest rates and fees and the best features your business is eligible for. Many business lenders will define their lending requirements directly on their website, or representatives will give those to you over the phone.
Lenders usually state requirements for time in business, monthly or annual revenue and credit score. They may also require a personal guarantee or collateral. As you’re comparing lenders, you may want to prequalify with multiple lenders. That way, you can see the exact loan offers complete with the rates for bad credit business loans that you’ll be charged. Bankrate insight A business checking account may come with higher fees and limited free transactions compared to a personal checking account. But they can help limit possible liability and make it easier to file taxes. Plus, many lenders require potential borrowers to have deposits made to a business checking account.
Find a co-signer
While not required, finding a co-signer to guarantee payment could help you secure financing, especially if your credit is too low to qualify for funding on your own. But you want to make sure you make all payments, or the co-signer will have to make payments for you or face negative consequences, including negative marks on their credit report.
If a co-signer doesn’t fully understand the responsibility, you could ruin a relationship if they’re not prepared to back you if your business can’t make the payments.
Bottom line
Getting a business loan with a 500 personal credit score may take finding the right loan and putting your best application forward. While options are limited, you can find lenders specializing either in alternative loans or business loans for bad credit. Once you know your options, you can compare loans with the most affordable rates and features that best match your financing purposes.
Frequently asked questions
Yes. Some lenders welcome business owners with credit scores as low as 500. These loans focus less on your credit score and more on the strength of your business and your ability to repay the loan. Most business loans for bad credit will have high interest rates and fees. But the SBA has loan programs and lenders that can help borrowers with low credit scores. These loans have favorable interest rates.
The minimum credit score for an SBA loan depends on the lender. Banks and credit unions typically require a credit score of 650 or higher. Some online lenders like Lendio offer SBA loans for credit scores of 600. And some SBA microlenders may not have a credit score requirement.
It’s possible to get a $10,000 loan with a credit score of 500. It depends on other factors like the type of business loan, how long you’ve been in business and whether you have collateral to back the loan. If you struggle to get a loan from traditional sources, you may qualify for an SBA microloan.
Yes, startup loans tend to stay lenient in terms of credit requirements. For example, a lender may offer business loans with a minimum 600 personal credit score while accepting businesses with six months’ experience. Some lenders do offer startup business loans for a 500 credit score.
Getting a no-credit-check business loan is possible, though difficult, since most lenders set a minimum credit score required to be eligible. You may be limited to startup funding options like business grants, crowdfunding or financing through a pool of investors.
If you don’t have the credit history to show you’re a good fit for traditional business loans, you might opt for a certain type of small business loan for bad credit. This may include invoice financing, invoice factoring or merchant cash advances. These types of business loans either bypass credit checks entirely or lower credit requirements to accept most loan applications. Invoice financing uses outstanding invoices and your clients’ credit to determine loan approval, while merchant cash advances base approvals on your future credit and debit card sales.
