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Bad Credit Business Loans for Veterans: The Essential Guide

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According to data from the US Census, veterans comprise 5.2% of employer business owners. This vital segment helps drive economic growth and create jobs.

Despite their contributions to military service and as small business owners, veterans still face many obstacles to business financing. A low credit score makes it even more difficult for veterans to get approved or fully funded for small business loans.

Fortunately, there are some business loan options for veterans with bad credit. This guide explores how bad credit business loans for veterans work, where to find them, the pros and cons, and how to apply.

Specifically, we’ll answer these questions and more:

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    What are Bad Credit Business Loans for Veterans?

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    Bad credit business loans for veterans are specialized loan programs to support veteran-owned small businesses with imperfect credit histories. These loans offer flexible terms and personalized options to cater to veterans’ unique requirements.

    Bad credit business loans through our lender network offer the following features:

    • Funding Amounts: $1k – $5 million.
    • Factor Rates: 1% – 6% p/mo.
    • Terms: 3 months – 5 years.
    • Funding Speed: 1 – 3 business days.

    Veterans seeking funding for their businesses benefit from bad credit business loans through access to capital, which might have been challenging to obtain from traditional lenders. Veteran small business loan programs for bad credit allow prospective borrowers to rebuild their credit scores while growing their businesses.

    What is considered Bad Credit for a Veteran Business Owner?

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    Veterans seeking small business loans may face challenges due to bad credit, which typically involves a credit score below the minimum threshold lenders set. Factors such as credit history and the lender’s credit determination play crucial roles in assessing creditworthiness.

    Here are the credit score ranges for FICO scores:

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

    Any score below 580 is considered bad credit. However, veteran business owners in the fair range may still have trouble accessing business loans from traditional lenders. Scores between 581 and 670 are classified as subprime credit.

    As such, veteran business owners would typically apply to a subprime lender specializing in approving and funding loans for borrowers in this range. Subprime lenders tend to be alternative, online, and non-bank lenders. Some community development lenders also specialize in subprime lending.

    Veterans with good credit scores (670-740) can typically access traditional business loans but may face higher interest rates and fees. Borrowers with very good or excellent scores gain access to the most advantageous business loans, which offer lower interest rates and longer repayment terms.

    What challenges do Veterans with Bad Credit face regarding Business Loans?

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    Struggling with a low credit score presents various challenges for veteran business ownership. Here are some of the issues they face.

    Fewer Lender Options: While some business lenders offer bad credit financing, veterans have much fewer options when it comes to lenders. This can make it more challenging for them to find the best fit for their business’s goals and funding needs.

    Lower Approval Odds: A lower credit score makes getting approved for a business loan more difficult. Bad credit business loan lenders scrutinize revenue and cash flow more closely.

    Higher Interest Rates: Even if approved for a business loan, veterans with bad credit typically face higher interest rates and increased fees. The extra cost of capital can create a significant financial burden that limits the effectiveness of the loan.

    Lower Borrowing Amounts: A bad credit score also means it’s less likely to get fully funded on a business loan. As a result, the loan funds might not cover the reason for the loan in the first place.

    Shorter Terms: Bad credit loans tend to be short-term financing options. Repaying the loan in a shorter period can be difficult, leading to an increased risk of late payments or default.

    Where can Veterans find Bad Credit Business Loans?

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    Veteran business owners have several options for finding bad credit business loans.

    Alternative Lenders

    Alternative lenders can be a viable option for veterans with bad credit looking for business loans. These lenders are more flexible in their approval criteria and are willing to work with individuals with less-than-perfect credit histories.

    Bad credit business loans from alternative lenders typically have higher interest rates and shorter repayment terms than traditional bank loans. However, they can provide veterans with the funding they need to start or grow their businesses, even if they have previously struggled with credit issues. It’s important for veterans to carefully consider the terms and conditions of these loans before committing to ensure they can comfortably meet the repayment obligations.

    Community Development Financial Institutions (CDFI)

    CDFIs provide financial services to underserved communities, including veteran-owned businesses. These institutions offer bad credit business loans to veteran entrepreneurs who may not qualify for traditional bank loans due to their credit history.

    To secure a bad credit business loan from a CDFI, veteran business owners can start by researching CDFIs in their area that specialize in serving veterans. They can then contact these institutions to inquire about their loan programs and application requirements.

    Traditional Lenders

    Traditional lenders like banks and credit unions typically don’t approve bad credit business loans. Applicants usually need excellent credit, high annual revenue, and at least two years in business to qualify for a conventional business loan from a bank or credit union.

    However, some traditional financial institutions may offer special programs for veterans. In particular, it could be worth looking into loans from local banks or credit unions.

    If a veteran business owner already has a relationship with a local bank, that can help with getting approved. Some credit unions cater to military service members and may also offer special financing for veterans.

    What are the best Bad Credit Business Loans for Veterans?

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    Here are some of the most accessible business funding options for veterans with bad credit.

    Business Line of Credit

    A business line of credit is a flexible financing product that allows business owners to access a predetermined amount of funds as needed. This type of credit may be accessible for bad credit because it is often based on the business’s revenue and cash flow rather than the owner’s personal credit score.

    Equipment Financing

    Equipment financing is a type of loan used to purchase equipment for business use. The built-in collateral of the equipment itself makes it more accessible for those with bad credit, as the lender can repossess and sell the equipment to recoup their losses if the borrower defaults on the loan. This reduced risk for the lender allows them to offer financing to individuals with lower credit scores.

    Working Capital Loans

    Working capital loans for bad credit are designed to provide businesses with the necessary funds to cover day-to-day operational expenses, even with a less-than-perfect credit score. Due to the increased risk associated with lending to businesses with bad credit, these loans typically have higher interest rates and stricter repayment terms. However, they can be a valuable resource for companies needing immediate cash flow support despite their credit challenges.

    Invoice Factoring

    Invoice factoring is a viable option for veteran business owners with bad credit because it allows them to access immediate funds by selling their accounts receivable at a discount. This can help improve cash flow and provide the necessary working capital to cover expenses and grow the business. Since invoice factoring is based on the creditworthiness of the business’s customers rather than the business owner, it can be a more accessible financing option for veterans with bad credit.

    Merchant Cash Advances

    A merchant cash advance is a type of alternative funding where a business receives a lump sum of capital upfront in exchange for a percentage of future credit card sales. This funding option may be the most accessible for those with bad credit because approval is primarily based on the business’s sales history.

    How can Veterans qualify for a Bad Credit Business Loan?

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    Bad credit business loans typically focus more on revenue, cash flow, and projected growth to determine eligibility. Different lenders may set various criteria. Approved businesses we work with here at UCS usually meet the following criteria:

    • Minimum Credit Score: 475+
    • Minimum Revenue: $240k+
    • Minimum Time in Business: 6+ months

    What are the benefits of Bad Credit Business Loans for Veterans?

    Bad credit business loans allow veterans to invest in their businesses, expand operations, hire more employees, and achieve growth objectives. Successfully repaying a bad credit business loan can also help veterans improve their credit scores over time, leading to more opportunities for financing in the future.

    Since online lenders are the primary source of bad credit business loans, veterans benefit from easy online applications and quick approval times. Once approved, most alternative lenders also offer fast funding on bad credit business loans.

    What are the drawbacks of Bad Credit Business Loans for Veterans?

    Bad credit business loans come with several drawbacks that veterans should be aware of before considering this option. Some of the main disadvantages include high interest rates, shorter repayment terms, and potential damage to personal credit.

    High interest rates can make repaying the loan challenging, increasing financial strain on the business. Shorter repayment terms mean veterans may have to make larger payments, further putting pressure on their cash flow. If the business fails to repay the loan on time, it can negatively impact the veteran’s personal credit score, making it harder to secure financing in the future.

    Bad Credit Veteran Business Loan Pros & Cons

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    • Access to funding for veterans with bad credit.
    • Opportunity to grow or start a business despite credit history.
    • Can help improve credit score with timely payments.
    • Accessible applications with quick approval and fast funding.


    • Higher interest rates compared to traditional business loans.
    • Limited loan amounts available.
    • Shorter repayment terms.
    • Risk of falling into deeper debt if not managed properly.

    How can Veterans apply for a Bad Credit Business Loan?

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    Veterans can apply for a bad credit business loan through our lender networking with the following steps.

    Step 1: Choose the Right Product

    Bad credit business loans come in many forms. Choosing the best option requires evaluating borrowing terms that pose the least risk for your cash flow. Is your business highly seasonal? Are you prone to occasional dips in revenue? It would be best to consider the funds’ intended purpose since this directly affects how long it will take you to pay it back.

    Step 2: Gather Your Documents

    Depending on the bad credit business loans available, you may need the following documents and information:

    • Voided business check.
    • Bank statements (3 Months).
    • Credit card processing statements (3 Months).
    • Accounts receivable aging report.
    • Accounts payable report.
    • Drivers license.

    Step 3: Complete Application

    You can begin the application process by calling us or filling out our one-page online application. Either way, you’ll be asked to enter the information from step 2 above, along with your desired borrowing amounts.

    Step 4: Speak to a Representative

    Once you apply, a representative will contact you to explain the repayment terms & percentage rate of your available options. This way, you won’t have to worry about surprises or hidden fees during repayment.

    Step 5: Receive Approval

    The bad credit business loan application process generally takes a few business days, depending on your chosen product. Once the file is approved and closed, a lump sum of funds should reach your checking account in 1-2 business days.

    Frequently Asked Questions

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    Here are the most common questions about bad credit business loans for veterans.

    Does the VA offer Business Loans for Bad Credit?

    Veterans Affairs (VA) doesn’t actually provide funding for veteran business loans. While you may hear the term “VA business loan” or “VA small business loan,” this is a catch-all term for various lending options.

    However, it may provide resources for finding business loans. In addition, veterans can often get advice on improving credit scores, negotiating with lenders, and creating business plans. For example, the VA Office of Small & Disadvantaged Business Utilization (OSBDU) may offer resources.

    The VA also works with other organizations to support veteran business owners. It might have resources on available CDFI business loans, small business grants for veterans, or nonprofit organizations that offer veteran support.

    SBA Veterans Advantage Program

    One of the most beneficial options is the Small Business Administration (SBA) Veterans Advantage Loan Program, a subset of the SBA 7(a) loan specifically for veterans. The VA may assist business owners with applying for SBA loans. However, it may be difficult for business owners with bad credit. Most SBA-approved lenders require good to excellent credit, typically 675+.

    How can Veterans boost their Credit Scores for better Business Loans?

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    Veteran business owners can take several actions to improve their credit scores and increase their loan options. Here are some keys to boosting credit quickly:

    • Pay bills on time.
    • Keep credit card balances low.
    • Limit new credit applications.
    • Check credit reports regularly for errors.
    • Consider debt consolidation.
    • Become an authorized user on someone else’s credit card.
    • Keep old accounts open to maintain credit history.

    What are the alternatives to Bad Credit Business Loans for Veterans?

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    Here are some alternatives to bad credit business loans for veterans.

    Small Business Grants

    Small business grants are a great alternative to bad credit business loans. These grants do not need to be repaid, making them an attractive option for veterans looking to start or expand their businesses.

    Business Credit Cards

    A business credit card can be an alternative to a bad credit business loan by providing access to funds for daily expenses, purchases, and cash flow needs. It offers flexibility in spending and repayment options, helping businesses manage their finances effectively.

    Personal Loans

    Consider personal loans as an alternative to bad credit business loans, especially for small businesses. Personal loans can provide more flexible terms and may be easier to qualify for than traditional business loans.

    Nonprofit Organizations

    Nonprofit organizations like The Second Service Foundation (formerly the StreetShares Foundation) and Veterans Business Fund specifically focus on funding and supporting veteran-owned businesses. These organizations offer various financing options, including loans and grants, to help veterans start or grow their businesses.

    Bad Credit Business Loans for Veterans – Final Thoughts

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    Bad credit business loans for veterans offer a valuable resource for those who have served our country but face financial challenges. These loans allow veterans to start or grow their businesses despite credit obstacles, ultimately supporting their entrepreneurial endeavors and economic success.

    However, given the risk of these loans regarding interest rates and repayment terms, veterans should carefully weigh their options. Compare different loan types, interest rates, lenders, and terms to find the best option for your cash flow and business goals.

    Contact us if you have more questions or to apply for a small business loan. Our alternative business funding experts can help you find the best financing options for your credit score.


    We will help you grow your small business.

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        How much Working Capital would you like for your business?

        At UCS, we understand the value of your time and want to ensure that your application has a great chance of approval. Please take note of the following details before applying:
        • To be eligible, it’s necessary to have a business bank account with a well-established U.S. bank such as Chase, Wells Fargo, Bank of America, Citibank, or other major banks. Unfortunately, online-based bank accounts like PayPal, Chime, CashApp, etc., are not permitted.
        • When describing your current average monthly sales deposits to your business bank account, please provide accurate information. Our approval process is based on your current business performance, and it’s essential to provide accurate details about your current sales in the first question on the application form. We cannot approve applications based on projected revenues after receiving funding.
        We appreciate your understanding and cooperation in ensuring a smooth and successful application process.
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