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Did you just do a double-take when you read the title of this blog? What?! You mean I can actually use my bad credit to get a small business loan?

Well, not exactly. But you can get a business loan despite your credit problems. It takes money to keep your business going. And, frankly, a lot of small businesses find themselves in a bad credit situation. According to, “There are a lot of reasons why a small business might be deemed uncreditworthy. They run the gamut from slow sales to poor collections to late payments to bad personal credit.”

Most of the time, the underlying problem is poor cash flow. Smart borrowing can smooth your cash flow and give you the working capital you need. So bad credit does not mean no credit. You aren’t really using your bad credit to get a business loan. But you aren’t using bad credit as an excuse to let your business decline.


It’s not just embarrassing to have bad credit. It’s usually a deal-killer, if you were hoping for a business loan from a bank. That said, it may still be possible to get an SBA-backed small business loan. You’ll pay more, of course. And there will be plenty of paperwork. But it could be your best option, depending on the amount you need to borrow and the reason.

Bad credit bites you in other ways, too. Vendors may not be willing to do business with you. Or they will demand cash up front instead of letting you pay over 30, 60 or 90 days. That requires a bigger cash outlay, all at once. You may need a small business loan to cover that. On the other hand, vendors may give you a discount for paying up front. That can help offset the cost of your loan.

You should know that anyone can see your business credit score. In some industries potential customers may check you out first. A low score could put you out of the running for a big job. That’s potential revenue down the drain.

If you need money now, then this is the time to get a small business loan with bad credit. That way you can keep building your business. And start repairing your credit score.


You might be surprised to learn you have options for a small business loan. Even with bad credit. These funding options do not require good credit because they are based on other aspects of your business. If you can show steady income, you can borrow against that. For example:

  • Revenue-based business loans are based on your annual average bank deposits.
  • Merchant cash advances are based on the volume of your credit card sales.
  • Accounts receivable loans, or factoring, are based on the amount of your outstanding invoices.
  • Inventory loans use the inventory you’re purchasing as collateral. Sometimes you can use existing inventory as collateral to obtain a working capital loan.

The amount you can borrow varies with each type of small business loan. Any one of these business financing alternatives might work for you, at any given time. The best choice depends on:

  • Your type of business
  • What you plan to do with the money
  • How much you need

All of these choices typically cost more than a bank loan. That’s a cost of doing business with bad credit. But the right small business loan can help improve your credit. So your business benefits in two ways.

If you have a business line of credit or business credit cards, these are also forms of borrowing. But don’t use them as an “easy out” when you need money. That makes your bad credit worse. Focus on paying off the balances instead.

Are you in trouble because you have too many small business loans? That’s not unusual. You keep borrowing to try to get ahead of your bills. But you just get farther into debt. It’s time for a fresh approach. If you’re in over your head, it’s time to consider a debt consolidation loan.


It’s not about “using” your bad credit, it’s about losing it. As in getting rid of it. Your primary business goal should be to boost your credit score.

Assess your situation. Every small business is different. The factors that lead to bad credit differ, too. So your situation is unlike any other. You have to know where you are, if you want to make a change. It’s the first step toward building a new and improved credit profile for your business.

Learn to live within your means. That way you can put the most money toward paying down your debts. And rebuilding your business credit.

Shopkeep points out, “Your bad credit doesn’t have to be your business’ death sentence. There are options available to those seeking a small business loan with bad credit. However, you must give careful consideration to each and every one of your options before pulling the trigger. Perhaps the most important question of all you need to answer is, if any of them will be worth it for the long haul.”

That’s a critical point. Even with bad credit, you have to be proactive about growing your business. It’s possible you need a small business loan now:

  • To recover from a disaster
  • To handle unexpected repairs
  • To consolidate your debts

However, if you’re about to borrow for any other reason, ask yourself, “Will this project increase business revenue? How soon?”You must pencil out the costs and benefits of the loan to determine if it makes sense. You could use the money for:

  • Marketing
  • New equipment or inventory
  • Hiring more people
  • Meeting monthly obligations
  • Remodeling or expansion

But will this small business loan generate enough additional revenue to help improve your financial position? If not, it is not the right time for this business loan.

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