SHANE PIERSON
Purveyor of Honest Capital
Can You Really Get a Business Loan with Bad Credit?
It’s one of the most common questions people ask online. And every version of it sounds about the same:
“I’ve got a business that needs funding, but my personal credit is terrible. What are my options?”
The answer nobody wants to say out loud is simple. You don’t have many.
If your credit is damaged, most lenders won’t fund you unless you give them something else to feel safe. That might be collateral. It might be a co-signer. It might be proof that your business throws off more cash than you need and has for at least a year.
And even then, you’ll probably get offers that are short-term, high-interest, and structured to get paid back before you ever see the money move through your business.
This isn’t about fairness. It’s about risk. If your personal credit shows missed payments, maxed-out cards, or unresolved debt, a lender assumes your business will behave the same way. It doesn’t matter that they’re separate. You signed for both.
Yes, there are workarounds. Yes, there are lenders who will still talk to you. But you’ll want to go into those conversations knowing what’s real and what’s going to hurt if you say yes too fast.
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Why Personal Credit Still Drives Most Business Loan Decisions
A lot of people hear about business credit and assume it works like personal credit. You open a few accounts, keep them current, and eventually your business builds its own score. That’s partially true, but it takes longer than most think, and it rarely stands on its own when you’re trying to borrow real money.
Until your business is doing strong revenue every month, paying vendors early, and filing clean tax returns, lenders will judge the deal based on you. Your credit score. Your financial history. Your track record with managing obligations.
They’re not just underwriting your business. They’re underwriting your behavior.
Most small business loans, even through banks and the SBA, still require a personal guarantee. That means if your business fails to pay, you are personally responsible for the balance. Lenders take that seriously. If your personal credit shows missed payments or unresolved debts, they don’t just see a number. They see risk they can’t control.
Some fintech lenders will make small offers based on revenue or bank statement activity. But the dollar amounts tend to be limited. You might get a few thousand dollars, maybe ten or fifteen if your business cash flow is strong. Once you cross into higher loan amounts, your credit becomes a hard stop.
This isn’t a loophole you can build around quickly. It’s something you need to face head-on and plan around.
What’s Actually Available When Your Credit Is Bad
There are lenders who will talk to you. But you’re not going to get a ten-year term loan with a friendly rate and no strings attached. The offers you’ll see will be expensive, short-term, and structured to put the lender in control.
Here are the types of funding you’ll come across most often:
Merchant Cash Advances
This isn’t a loan. It’s a future sales deal. You get a lump sum, and in return, the lender takes a fixed percentage of your daily sales until they’ve collected what they’re owed. You’ll usually see the cost quoted as a “factor rate” instead of an interest rate, but once you do the math, it’s brutal. Think double digits, sometimes way past thirty percent.
These are easy to qualify for. But they’re hard to live with. Daily payments crush your margin. And if you don’t have high-volume sales, it dries up your cash before you can reinvest in anything useful.
Short-Term Online Loans
These look a little more structured. You borrow five to fifty thousand dollars, and the lender sets a fixed repayment term, usually six to eighteen months. The payments come out weekly or daily. They’ll look at your last few months of bank statements and move fast.
Rates are still high. And the terms are tight. But if your business has strong deposits and your credit isn’t completely broken, you might get an offer.
These loans work if you have a short cash gap tied to a guaranteed return. If not, they just drag you into more pressure.
Secured Loans
If you have equipment, vehicles, inventory, or even cash in another account, some lenders will let you secure the loan with those assets. They’re not ignoring your credit, but they’re more comfortable taking the risk if they know they can recover something if things go south.
These deals usually come with better terms, but the risk shifts to you. If the business can’t make the payment, the lender takes what you put on the table.
Microlenders and CDFIs
Community lenders and nonprofits often have programs for borrowers who are rebuilding credit or launching in underserved markets. They may offer five to fifty thousand dollars, depending on your plan and your business model. They’ll ask for your story, your projections, and sometimes require training or mentorship as part of the process.
It’s slower than the fast-cash online lenders, but the rates are usually fair. If you’re early stage and need someone to take a chance, this is a path worth exploring.
If you want options beyond merchant cash advances, try structured lending through Bluevine or American Express Business Blueprint.
What to Avoid, What to Fix, and How to Rebuild Toward Better Funding
When you’ve got bad credit and you’re looking for money, the biggest danger isn’t being told no. It’s being told yes by the wrong lender.
This is where a lot of business owners get burned. You’re under pressure, trying to solve a cash problem, and someone comes along with a solution that sounds like exactly what you need. Fast approval. No credit check. Money in your account by tomorrow. What they don’t tell you is how much it’ll actually cost or what happens when that repayment starts pulling from your account every single day.
That kind of money feels like relief on the front end and turns into a chokehold a few weeks later. Your working capital disappears, your stress spikes, and now you’ve got a payment schedule that doesn’t care if your customers pay late or your revenue dips for a few days.
If you’re in that situation, the first thing you have to do is slow down. Not every offer that says yes is worth taking. And when you’re already in a vulnerable spot, it’s easy to grab at anything that gives you hope. But if the structure isn’t built to help you breathe, it’s just going to make things worse.
Instead of chasing the next quick fix, step back and look at what you can control. The first thing is your personal credit. Even if the business is doing okay, your credit score is still going to influence how lenders see you. If you’ve got past-due accounts, get them current. If your credit cards are maxed out, start bringing those balances down. A twenty-point jump in your credit score might not feel like much, but it can change the tone of the conversation.
Next, clean up your business finances.
If you’re still mixing personal and business money in the same account, stop. Open a real business bank account, run every dollar through it, and start showing consistency. Lenders look at those statements. They want to see deposits coming in, expenses going out, and a margin that tells them you know how to run lean. If your account shows chaos, that’s what they assume they’re lending into.
You can also start building business credit slowly. That doesn’t mean applying for big credit lines. It means opening small net-30 or net-60 vendor accounts with companies that report to business credit bureaus. Order small supplies or services, pay on time, and let that history accumulate. It won’t replace your personal credit in the short term, but over time, it starts to build a separate financial identity for the business.
The truth is that rebuilding your funding options takes time. But you’re not doing it for a loan next week. You’re doing it so that six months from now, or a year from now, you’re not stuck choosing between expensive cash and no cash. You’re giving yourself leverage. You’re giving lenders a reason to see you differently.
And once that shift happens, the conversation changes. You’re not applying with your back against the wall. You’re presenting a case, on your terms, backed by numbers that speak for themselves. That’s how you earn the right to use capital strategically instead of borrowing out of survival.
Additional Reading:
5 Myths About SBA Loans Every Founder Should Know
Why Startups Get Denied Loans—and What to Do Instead — for users thinking a startup will bypass their credit issue.
What to Do If You Can’t Pay Your Business Loan — for those who already got approved, but it didn’t end well.
How to Buy a Business with an SBA Loan — to show a path forward even with imperfect credit if structured correctly.