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Is Bad Credit Stopping You from Getting Business Loans?

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Is Bad Credit Stopping You from Getting Business Loans?

By Marco Carbajo, Guest Blogger
Published: March 11, 2014

In a recent report, over 63% of business owners attempting to find funding say they most often targeted banks. Unfortunately, the success among these respondents of actually getting a business loan was a low 27%.  

However, recent news suggest small business owners considered creditworthy are discovering it to be easier to get business loans from traditional banks. This is good news for the economy since access to funding for small businesses is a part of job and economic growth.

Unfortunately, bad credit plagues a large percentage of small business owners as a result of the financial crisis several years back. The fact remains that it’s harder for smaller businesses ­– even with stellar credit ratings ­– to get traditional bank loans than it is for larger businesses.

Access to capital is the single largest roadblock most business owners face when growing their business. With a business loan, these businesses can hire new employees, purchase additional inventory, buy or upgrade equipment and increase their marketing efforts.

So what can a business owner do if bad credit is preventing them from getting a business loan?

The good news is there are alternative funding programs and solutions providing business owners the opportunity to obtain a business loan or line of credit regardless of having bad personal credit. Instead, other factors are taken into consideration such as bank deposit history, credit card sales, credit partners and other data sources.

Here are several factors that can get you a business loan regardless of having bad credit:

Bank deposits – A business with regular bank deposits can put its cash flow to work with revenue-based loans. This program is based on the deposits going into the business bank account on a monthly basis. Typically, a business can obtain a business loan equal to 10% of its annual gross deposits regardless of having bad credit. Another benefit of this program is the time it takes to get funded, which is approximately 7 business days.

Keep in mind the loan term can be as long as 18 months with this program, with rates slightly higher than a traditional bank rate. It requires no collateral, financials or tax returns. Repayments are made in small increments every day via ACH from the business bank account.

Credit card sales – This type of funding program, known as a merchant cash advance, provides businesses with upfront cash in exchange for a portion of future credit card sales. For businesses that have regular monthly credit card sales but struggle with bad personal credit, a merchant cash advance may be a viable option.

However, be very selective on what merchant cash advance provider you select. Some providers can cost as high as 38% while others can be as low as 12%. In addition, when it comes to repayment, the majority of merchant cash providers take a fixed percentage of your daily credit card receipt volume until the advance you took is paid back. Other business cash advance providers may offer a fixed monthly installment payment for its repayment method.

Credit Partner – Using a business partner(s) as a credit partner for obtaining lines of credit in the form of business credit cards can be a viable solution to overcome a personal credit challenge. A business partner who has strong credit scores is the best place to look. You may also want to consider someone who may be interested in participating in your business as a potential credit partner.

This method does bring risk to the credit partner because they are cosigning with the business to obtain funding. However, it’s important to note the type of unsecured business credit cards I am referring to will not appear on the personal credit reports of the cosigner unless they go into default.

There are many other types of funding programs that offer small business owners the opportunity to get business loans or access to cash without having perfect credit or subjecting themselves to all the rigorous analysis, cumbersome paperwork, lengthy process and aggravating timelines that comes with a traditional business loan.  

About the Author:

Marco Carbajo
Marco Carbajo

Guest Blogger

Marco Carbajo is a business credit expert, author, speaker, and founder of the Business Credit Insiders Circle. He is a business credit blogger for Dun and Bradstreet Credibility Corp, the SBA.gov Community, About.com and All Business.com. His articles and blog; Business Credit Blogger.com, have been featured in 'Fox Small Business','American Express Small Business', 'Business Week', 'The Washington Post', 'The New York Times', 'The San Francisco Tribune',‘Alltop’, and ‘Entrepreneur Connect’.


I am looking for ideas for funding a white water rafting business. Credit scores are decent but due to a collection we were unaware of and being some what a start up and seasonal despite the massive revenue possibility and our ability to make loan payments by keeping full time income and a large amount of collateral we are still hitting road blocks. Do you have any suggestions?
I am trying to open up a barbershop but I need financing and I don't have good credit nor do I have any collateral or money in the bank I am a master barber who's been in this trade for more than 25 years, how can I obtain the financing I need ?
I am in this situation trying to open a barbershop in Fl with no capital and poor credit
Im curious in what is the best avenue to take when you are trying to get financial support for a small business? I have bad credit but no credit cards (not yet) and no collateral at this time. However, I run my business myself as sole proprietor but I have to have so much invested to run my business. Please help to advise.
My friend wants to open a dance studio as is looking for a financial partner. I'm on disability and I also have bad credit. House in foreclosure, a repossession and unpaid bills/credit cards. I have a bank account but keep it in my mother's name. Not much is in it. Between my house and everything else I'm about $250,000 or so in debt. My house is uninhabitable and I surrendered it. I so much would love to become a business partner with my friend but don't know where to turn for help. No bank would give me a loan. Please advise where I could go for help. Thank you.
I am a black male who lives in a small predominately white town trying to obtain a start-up loan for a Owner Operator Trucking Company. Local bank are denying funding mainly because credit score and not so much as my financial ability to repay the loan. I have worked with the local SBA branch in advice on how to construct an effective and honest business plan that shows proof of the potential revenue. I am incorporated business registered federally and state wise. Now my hold back is lack of finding. The Local SBA Branch told me they are willing to back me when I find someone to give me the loan. What can I do to get a loan with poor credit, no down payment and no collateral. Banks here are asking for all three when in actuality if I had those things I would not need to look for a loan. Please advise.
looking for assistance as a business owner - I have a lot of interest from different sources to grow my business. Looking to seek capital but unfortunately my credit is not to great - seeking help please. Thanks
I have the same question as rockabillieme minus the disabled and disability portion. Also, where can this information be obtained?
I am in need of a business loan to expand my company and move into a warehouse. I need running capital for a year. $100,000.00 I would appreciate any and all suggestions of who to contact. My credit score is not good. Its between 630-640. I have been through a bankruptcy in 2011. This is my new business and its doing very well. It is now 18 months old. Please anyone out there with advice, I appreciate it.
If one decides to use a partner for the purposes of obtaining funding/credit, I suggest doing so very carefully. Get in writing what responsibilities, risks, and rewards are expected from each party. Like Dave Ramsey says; " the only ship that doesn't sail is a partnership". Established business owners who have been turned down by the banks do have a few options. Increasefundings.com lists loan programs that don't require good credit or collateral.


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