Obtaining Business Loans With Bad Credit

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  • Most business loans and credit lines aren’t financed by conventional banks.

For business owners with bad or limited credit, there are other options for securing funding. Do not let less-than-stellar credit prevent you from obtaining loans and credit lines vital to the success of your business. Here are some funding alternatives for you to consider that do not require good credit but will still provide you with much-needed business funding.

This option allows you to use an existing 401(K) or IRA as collateral without any tax penalties. You can often get rates lower than 5%, and you will continue to earn interest on your 401(K) at the same time.  This type of loan takes less than three weeks to close and fund your business. There are no consumer credit score requirements, and no tax return or bank statements are needed. You can finance 100% of the value of your 301(K), thus investing your own money in your business instead of buying stocks in other businesses.Lorem ipsum dolor sit amet, consectetur adipiscing elit. Ut elit tellus, luctus nec ullamcorper mattis, pulvinar dapibus leo.


This is free money from the government. Not all industries offer them, so you need to check. Apply for a grant as soon as it is available; be careful to fill the application out completely and accurately to ensure it gets consideration. Some grants may require application fees or letters from business owners. Lists of grants can be found at:

  • https://www.grants.gov
  • Rural Industries (USDA):
  • HUD: https://www.hud.gov/
  • State or local government sites
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Funding you cannot get from a regular lender; instead, it comes from a microlender. The Association for Enterprise Opportunity www.microenterpriseworks.org is probably your best bet for assistance with finding a microlender. This will not yield a lot of funding – typically $500 to $35,000 – but this may work for your business if you’re looking for funding in this dollar range.


Using platforms such as Kickstarter or Indiegogo, you can get access to money from a group of people instead of one entity. These funds usually do not need to be repaid. However, it requires effort on your part to create a good pitch for your business (think Shark Tank) so that people will like your idea and be willing to donate. Bear in mind that these platforms will take a percentage of the donations as their fee, and you must return the funds if you do not meet your donation goal. The exception to this is Indiegogo, which has a flexible funding option. Even if you do not reach your funding goal, you can still get the entire amount funded, less their fee.

Another alternative Is to build business credit and use this to obtain business loans and lines of credit.  This, however, takes time and there is a process (four tiers) by which business credit should be built for optimal results:

  • Vendor Credit Tier – Establish 5 to 8 accounts with starter vendors who report to business credit reporting agencies. Some of these include U-Line, Quill, and Grainger. Paying these accounts early or one time ensures you build some business credit in a short time.

  • Retail Credit Tier – Establish 10 accounts with retail vendors such as Home Depot, Sam’s Club, Lowe’s, Costco, Staples, Office Depot, Amazon, and Walmart. Paying early or on time strengthens the business credit you already built.

  • Fleet Credit Tier – After establishing the vendor and retail credit, apply for fleet credit at Citgo, BP, Chevron, Wawa, and others. These credit cards can be used for vehicle fuel, repairs, and maintenance. Because you built solid business credit, no personal credit check or guarantee will be required.

  • Cash Credit Tier – After establishing 10 to 14 accounts on your business credit report and paying these early or on time, you will be able to obtain credit from Visa, MasterCard, American Express, etc. Because these are accepted almost everywhere, you have the opportunity for more payment experiences which will only solidify your business credit foundation.

Once good business credit is established, it is a tremendous asset to your business which will serve you well for many years. After several years in business, your solid business credit will allow you to qualify for conventional financing, although you may find you don’t even need it since you built considerable business credit lines.