How to Score a Business Loan Despite Having Bad Credit Score

Usually, it should be easy for you to score a business loan from banks and credit unions, provided that you show that your business can pay the amount …

Credit Score

Usually, it should be easy for you to score a business loan from banks and credit unions, provided that you show that your business can pay the amount you borrowed or you hand over an acceptable collateral. However, if you have a bad credit score and you want to apply for a business loan, it may not be that easy for you.

Having a bad credit score makes you a high-risk and unreliable to banks and other lenders. This hinders your plan to build your business. Fortunately, you can still score a business loan despite having a bad credit score. Take your cue from the following.

Create a clear and feasible business plan.

Even with a bad credit score, you can get a business loan as long as you are prepared. Creating a clear and organized business plan will help you convince the lender that you are reliable, and you can pay the payment terms.

Included in your business plan should be the number of your monthly sales. You can also show your lender significant improvements in your business over time. When they are fully convinced with your business plan, not only will they lend you the amount of money you need, but they will also be willing to work with your business.

A detailed allocation of the loan you want to borrow will also make you appear more reliable to the lender.

For example, if your loan goes to the expenses for raw materials, your lender would appreciate you more if the costs for the raw materials are broken down. The expenses should come with the specifics of the raw materials such as the brand, the quantity that you will buy, the exact amount of the materials, and where you will purchase those materials. Outlining this will help you not only in short-term financing but also in the long run.

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Research credit score requirements from various lenders.

Focusing on one lender will not help you in building your business. Don’t waste your time haggling with a lender, especially when you don’t meet their credit score requirements. What you need to do is visit various lenders and ask for their credit score requirements. In this way, you can create multiple options to take, compare the requirements, and choose the best loan that suits your business.

Researching requirements in terms of credit score from lenders will also help you in the long run. If you have earned a high credit score, it spares you the time to look for a better business loan, as you have already done your research. This will also help in taking a loan quicker, as you already know the requirements to present to the lenders.

If you are living in California, you might be in for a treat. California business loans are geared towards helping potential entrepreneurs to build their small businesses. California-specific loan programs such as small business loan guarantee programs target small businesses that have trouble accessing a business capital due to having a bad credit history. If you’re a Californian, you might want to check such loan programs.

Prepare to receive a higher rate.

When you have a bad credit score, and you want to take a business loan, it may not be advisable to expect a lower interest rate. This is because your lender will likely see you as a high-risk customer. You’ll have to consider the interest rate that they offer before you decide on taking the loan.

If you think that your business can cope with the interest rate while still providing your day-to-day operational expenses, then you may want to take the loan. However, if you think otherwise, it might be better if you wait on taking out a loan.

Improve your credit score.

The only way to get a loan that fits with your business is by improving your credit score. If you’re serious about getting a loan for your business, get rid of your bad credit score and improve it.

You can start by examining your business credit report to check if there are any discrepancies that might have led you to a bad credit score. If there are, you can report the discrepancy to credit bureaus so they can adjust your credit score.

Pursue alternative funding.

To start up your business and cover operation expenses, you might want to find alternative funding. Although these are technically not business loans, you can still gain a significant amount of money from asking from your family and friends, seeking merchant cash advances, and utilizing line of credit.


Having bad credit score doesn’t always mean that you can’t reach your dream of building your own business. Start with these three ways of scoring a business loan and start up your business career. When you are already there, start improving your credit score, so in the near future, you can access better business loans.


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