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Small Business Lending Solutions

Small business owners with no credit or poor credit history may find themselves having a hard time getting the capital they need to grow their businesses. Franklin Merchant Capital has loan specialists that can tap hard-to-find lending sources to support your growth. Credit scores are important as the path of least resistance, but not the end-all in securing the financing you need.  

On this page you’ll find the following topics:

  1. Tips for getting a Business Loan with Bad Credit in 2022
  2. Why Your Credit Score Matters
  3. How to Get a Business Loan with Bad Credit
  4. Improve Your Chances of Obtaining a Business Loan
  5. Types of Bad Credit Business Loans
  6. Things to Consider When Applying
  7. How to Choose a Loan Based on Your Business Needs and Credit Score
  8. What Lenders Look at on an SMB Loan Application
  9. How to Get a Better Business Loan in the Future
  10. FAQs on Business Loans with Bad Credit

Franklin Merchant Capital Makes Getting a Business Loan with Bad Credit easy 

In 2022, the economy is a turbulent environment. And since the COVID-19 pandemic broke out in 2020 it has fluctuated with positive and negative news.  The economy grew 7.5% in 2021, jobs reports beat expectations, and unemployment remains low, but with that has been a spike in inflation, in part created by fast growth and an overloaded supply chain that is causing a shortage of items in the consumer market, thus higher prices. 

Good credit scores are certainly helpful in securing small business loans for inventory, operations, and/or expansion. Whether that means you have good business credit or have good personal credit to back up the business, or not. 

Banks are risk-averse, but that doesn’t mean there are no options for you. We recognize the bureaucracy in dealing with big institutions, as well as have access to smaller unknown ones and access to different types of loan structures. 

Apply now to speak with our Funding Specialists.

Getting a Business Loan with Bad Credit from Franklin Merchant Capital 

One of the aspects that separate us from the competition is that we have a wide variety of business lending solutions ranging from those with good credit to no credit. Moreover, we customize programs to meet your needs, rather than try to squeeze you into a predefined program. Low FICO scores don’t preclude you from getting the business funds you need. 

Working with Franklin Merchant Capital is easy: we have a quick and easy application process with little paperwork; loan specialists to guide you every step; high approvals and fast turnaround. 

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Why Your Credit Score Matters

Credit scores matter, absolutely. When you apply for a small business loan, depending on the ‘type’ of funding you’re looking for, lending will want to see credit scores.  

Your FICO credit score relies on the 5 C’s that include your character, your capacity, capital, the conditions, and your collateral. These are used to determine how reliable you are in regard to paying your debts, the timeliness, and the amount of debt you have in relation to assets and income. 

The FICO score is the most common model, although there are several credit scoring models. 

The different FICO credit scores range from:

  • Exceptional (800 – 850)
  • Very good (740 – 799)
  • Good (670 – 739)
  • Fair (580 – 669)
  • Poor (300 – 579)

If your FISCO score is 300 – 629, it is considered “bad credit.” However, you may still be able to secure a business loan even if your score falls within a lower range, you may be able to secure a bad credit business loan from an alternative lender that focuses more on where your business is going in the future than on what’s influenced your credit score in the past. Franklin Merchant Capital can help you navigate the maze of lenders to find the correct one for your business. 

See if you qualify now.

How to Get a Business Loan with Bad Credit

Even if you have bad credit, you can still obtain the funding you need to grow and operate your business. 

There are three steps.

1. Know Your Personal Credit Score

Lenders will always want to see your personal credit score to identify how well you’ve managed your debts previously, and then assess the risks involved with providing you for a loan. This doesn’t mean you can’t secure a lending source without a good credit score, but it is always good to work on (rewrite improving your credit score) before applying for a loan so you can have options to secure the best financing sources to explore.

2. Research Eligibility Requirements

There are specific requirements for each type of financing that may be seeking. Traditional business loans are often based on the following factors:

  • Personal credit score
  • Years in business
  • Annual revenue

If you research the requirements (or have Franklin Merchant Capital loan specialists research it for you) for each type of small business funding you may be considering so that you can determine which bad credit small business loans give you the best odds for approval.

Get personalized guidance from Franklin Merchant Capital for personalized on your financing options.

3. Choose the Best Option for Your Business

With such a wide variety of lending options for business owners with bad credit, that doesn’t mean that you shouldn’t research the lender’s reputation, just as they are reviewing yours. If they are credible, then explore their eligibility requirements and repayment terms, as these can vary quite a bit from lender to lender. 

There is a broad range of financing options for business owners with bad credit outside of traditional loans. When exploring alternative financing options, consider not only the eligibility requirements and repayment terms, but also the (rewrite lender’s reputation). Speak to service reps, and read borrower reviews to gain insights. Want you should seek out is a lender committed to supporting your journey to success, and one that has a proven track record of satisfied customers.

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Improve Your Chances of Obtaining Business Loans for Bad Credit

Bad credit doesn’t mean you can’t obtain a small business loan. But there are things that would help your chances. Certainly, if you have to foresight to recognize you’ll need financing in the future before you need it, then you can begin preparing for when that day arrives. 

Here are two ways you may be able to improve your chances of getting a small business loan with bad credit.

1. Provide Collateral

Lenders face inherent risks when providing business loans to small businesses. Even qualified borrowers are subject to q downturn in business, or economic disruption in the marketplace that leaves them unable to repay the loan. So the more collateral you have, the less risk is placed on the lending institution. To that end, there are two primary options; 

  • Merchant Cash Advance and/or invoice financing. In the first scenario, if you receive credit card payments from your customers, lenders will provide you with an advance against future receipts. In the second scenario, if you generate B2B invoices, you can use unpaid invoices as collateral against a loan — typically 70-85% advance on the total outstanding invoices.  
  • (rewrite Equipment financing). When planning to add new equipment to your business, you can use that very equipment you’re purchasing as the collateral to purchase it. Or, if you already have equipment unencumbered, you can use that equipment as collateral for a loan to expand or shore up operating cash flow.  

Ask a Funding Specialist which type of financing is right for you.

2. Use a Co-Signer

If you have a business partner, family member, mentor, or friend with strong credit, you may want to ask them to co-sign a loan with you. While they become the safety net for the lending institution if you default, you can increase your credit score if you maintain on-time payments. 

Types of Bad Credit Business Loans

If you have poor credit or no credit, there are alternative lenders, which include:

Short-Term Small Business Loans

A short-term small business fixed loan provides is paid back with preset payments that include both principal and interest. The business received a lump sum for the full value of the loan. 

Short-Term Business Line of Credit

A short-term business line of credit is ideal for businesses that have an ebb and tide of cash flow needs. This might be a business that is seasonal, for example. It works similar to a credit card, in that the borrower is preapproved to borrow up to a certain amount, but can draw down on it as needed. They then only pay interest on the amount of the loan outstanding.  

Collateralized Loans

If you have collateral to secure your bad credit business loan, you’re giving the lender the option to seize the collateral if you should default on your payments. But they can only seize assets up to the limit of their losses. These types of loans are also referred to as secured business loans. Most commonly, secured business loans use equipment or invoices as collateral. 

Merchant Cash Advances

If you’re running a small business in need of cash flow, a merchant cash advance might be right for you. Typically these types of loans are best suited to businesses that collect payments from customers via credit card. The lender would then provide you with a lump-sum loan in exchange for a percentage of future credit and debit card receivables. While this option may not be suitable for every business, a merchant cash advance is often easy to apply for and relies on the strength of sales, history. It has steeper interest rates but is easier to get than other types of loans. 

Working Capital Loans

Working capital loans are used to balance out your cash flow. It is often used to finance everyday business operations like wages, inventory, and/or taxes and subcontractors. These types of loans unlike other types are not for investments into long-term assets. You can apply now, quickly, and with minimal paperwork.

See how much funding you qualify for.

Apply Now

Things to Consider When Applying for a Small Business Loan

Whether you have good personal credit or not, or any business credit or not there are a few factors that might influence the terms of your business loan and your odds of approval. 

So before applying for a bad credit business loan, here are some things you should consider.

1. The Relationship of Personal Credit to Business Loan Approval

Business loan lenders will most always take into account your personal credit score to determine your creditworthiness. It is a numerical representation of your ability to pay back the loan. But even if your FICO credit score is low, your payment history also plays a part. So it is always a good idea to work on raising your personal credit score.  

Low credit scores are not only reliant on your personal credit on-time payments: it is also based on the ratio of your income vs. your outstanding balances. Therefore, pay down your outstanding loans as swiftly as possible before applying for a business loan. There are times that you may be approved for additional personal credit, but too much credit can hurt your score if you do not have the income to support it. As such, make sure your approved personal credit is in line with your ability to pay. 

2. The Relationship Between Credit Scores and Interest Rates

Business owners with great credit generally receive the best interest rates on their loans. If your personal or business credit score is low, there’s a greater chance your loan will include a higher annual percentage rate (APR), which describes the interest you pay for a year.

The good news is that securing a small loan with a manageable APR can help improve your credit score over time. If you are approved for small business loans for bad credit, each on-time payment can help raise your credit score while providing the financing you need to run and grow your business.  And rising business income can help when applying for a business loan. 

3. Online Lenders Vs. Traditional Banks

While banks are the traditional lending institutions and credit unions tend to have strict policies and eligibility requirements for loan approval. They also tend to be slower and require more documentation. Whether you have above-average or less-than-perfect credit, here are just a few benefits of alternative and online lenders compared to traditional lenders:

  • Turnaround times can be faster
  • They require less documentation required for approval
  • If approved, you’ll secure and receive funs faster  
  • Specific needs as a borrower can provide more flexibility
  • The approval rates can be higher

4. Age of Business and Startup Businesses

Certainly, a well-established business will have greater success in securing loans from traditional lenders, providing more options and the best terms. 

Younger [or startup businesseses] may have a harder time meeting a bank’s strict lending standards. On the other hand, alternative and online lenders, actively cater to underserved business owners. Franklin Merchant Capital has experts that work with businesses that have been in operation for just one year.

Consider other types of lending solutions. THese may include:

  • Business credit cards. These cards can be a practical solution for building your business credit score while having access to extra capital. To obtain one, you’ll need a federal tax ID number and a business bank account.
  • A secured personal credit card. Secured cards are easy to establish as you place a deposit to the account that you draw down on that will help build a payment history. 

5. Business Loan Costs

Small business financing terms often include additional costs you must consider beyond the principal amount of a loan. By keeping loan costs to a minimum, you’ll have more capital to reinvest in your business.

Small business loan costs often include:

  • Annual percentage rate. The “APR” is the interest rate you pay on your loan annually.
  • Down payment. The average amount a borrower will need to invest when taking out a loan is 25% payment requirements will vary between lenders. Collate allow be used as your down payment.
  • Factor rate. A factor rate is measured by business stability, average monthly profits, type of industry, and years in operation. Typically this applies to merchant cash advances (MCA). It determines the amount a borrower will owe. A 
  • Origination fee. This refers to the fee for processing a new small business loan. While some lenders might waive the origination fee, others may incorporate the fee into the overall loan balance.
  • Underwriting fees. These fees are collected by the underwriters’ review, verify and approve the information provided in a small business loan application, and then recommend terms for financing if approved.
  • Closing costs. When finalizing a loan, these fees include costs associated with loan-packaging fees, business appraisals, or recording fees.
  • Other fees. This could include check-processing fees. prepayment fees, and late payment penalties.

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How to Choose a Loan Based on Business Needs and Credit Score

There are some general benchmarks that may contribute to your loan approval:*

  • New businesses or Startups. If you are a startup — or have been in business for less than a year –, even if you have good credit scores, securing a business loan can be difficult. Potential financing options include startup financing, secured personal credit cards, and business credit cards.
  • Owners with a credit score under 550. Your path is more difficult, but not undoable. Alternative lenders often take into account other factors, such as growth, payment history that can result in you securing the loan you need. 
  • Owners with a credit score over 500. You could qualify for a short-term loan or even a medium-term loan if your business is doing well. With a credit score between 550 and 620, your chances are greatly improved. 
  • Owners with a credit score over 600. You may qualify for a medium-term loan if your credit score is 620 or above,. Another option for those with a credit score of 650 or higher is a Small Business Administration loan.
  • Owners with a credit score over 700. You’re in a good position to qualify with most lenders — including both direct and alternative lenders, as well as the Small Business Administration.
  • Businesses with large unpaid invoices. If you have ‘current’ invoices, then financing lenders weigh the strength of your business and your customer payment history that can offset your credit score.
  • Businesses with new equipment needs. Equipment leasing or equipment financing may be a good fit if you can show the benefit from a new piece of specialized equipment, 
  • Very small businesses. Consider financing options like business credit cards, secured personal credit cards, and startup financing while you’re building a business.

*These benchmarks do not represent actual approval odds for financing. Franklin Merchant Capital doesn’t consider credit score in our bad credit loan decisions — but instead bases approval on time in business and annual gross sales.

Compare Options to Determine the Best Loan for Your Needs

There are many factors to consider when evaluating your different loan options, so your decision to obtain financing for your business is important. including:

Short-Term vs. Mid-Term Repayment

The time in which a short-term loan needs to be repaid is typically one to three years. For a mid-term loan that extends to three to five years. The requirements to qualify for these types of loans can vary, as does the interest rates and payment terms. 

Interest and Fees on Open Balance

Interest rates fluctuate depending on the length and terms of the loan. But typically interest rates can be lower on longer-term loans, but the overall money paid on interest could end up being greater. 

It is important when developing your budget to assess your monthly operating costs, and then calculate how much of an interest burden your business can carry. 

Loan Limit

Not every business can obtain the ideal loan they’re seeking. Monthly payback rates may be higher than your budget allows for, or the initial loan is not quite enough to accomplish the growth and/or expansion that you had intended.  

These are all issues business owners have to weigh and contend with. You may need to realign your budget through cost-cutting, and/or make other changes. Note: marketing is one of the first things businesses look to cut when it should be the last. 

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What Lenders Look for on a Small Business Loan Application

Traditional lenders, such as banks, often require more information, while alternative lending sources request less. Business credit scores and personal credit scores are taken into account. 

Annual Revenue

If you’re seeking a bad credit small business loan, annual revenue may be an important factor for eligibility. Typically, if you do qualify, it would be for 8-10% of your annual revenue. 


Annual revenue is important, but so too is profitability. Some lenders will want to see evidence that your business is profitable, and thereby able to make the loan repayments. Profitability is not always to be all end all, however. Even if you’re not currently profitable, some lenders will take a shot with you if you can demonstrate several years of growth. 

Current Debt Obligation

You may have difficulty securing a new loan if you already have other outstanding loans. This is especially true if you posted collateral and have a UCC lien on that collateral, or the business itself. In such a scenario you should consider a consolidation loan as part of a refinancing. 

Cash Flow

If the old saying “cash is king” is true, then certainly cash flow is queen. Lenders want to know that you have the available cash on hand each month to make the required loan payments. Prove to them you can and your chances for approval go up.

Credit History

Red flags to lenders can be recent bankruptcy, especially a history of them, and/or foreclosures. While poor or little credit doesn’t disqualify you automatically, it does make securing a loan difficult for bad credit business loans. Franklin Merchant Capital has loan specialists that can assist you in finding the loans you need. 

Business Plan

Some lenders may want to review your business plan to better understand your business, but Franklin Merchant Capital doesn’t require it. However, developing a business plan may be a good  exercise in better understanding business, including:

  • unique value propositions
  • marketing strategies
  • leadership team
  • revenue and profit models

Your business plan should clearly define operations, markets, sales, and growth plans, and financing required. 

Apply Now

How to Get a Better Business Loan in the Future

Business loans are not a one-time need. As a business grows it will always need new loan funding to finance that growth. This includes the expansion of ongoing operations, new equipment, and/or inventory. 

You can increase your chances of obtaining the best terms of future loans by many of the suggestions above, which we list again below. 

Improve Personal Credit

Make a plan to improve your personal credit. If necessary, get a collateralized card where you deposit the amount — upfront — to cover your credit line. 

When applying for a business loan, personal credit matters, as it provides insights to the potential lender of your character and responsibility. 

Get proactive about improving your credit score with these simple steps:

  • Make payments on time
  • Keep recurring balances below 30% of your total credit limit
  • Limit how many credit cards you get
  • Keep an eye out for suspicious charges and notify the lender

The major credit bureaus are TransUnion, Equifax, and Experian. Below is a list of links to those and others. 


Establish and Build Business Credit

You can also establish business credit with a collateralized business credit card. Similar to the personalized card we mentioned earlier, you would have to deposit cash into the account as security. As you use the card and make timely payments, you can slowly get the limit raised. 

To have a business credit card you’d obviously have to have a legal incorporated business, a Federal Identification Number (EIN), and a business bank account. (talk to a business consultant at

Assess Your Business Plan

As you’re attempting to secure new business loans, the amount of that loan has to align with your business plan and the budget associated with it. 

Prove Your Creditworthiness

Depending on the nature of your business, adding experienced business partners to your staff, board of directors, or even an advisory board, may improve your creditworthiness. 

Another tip would be to get reference letters from suppliers and vendors to help establish your trustworthiness. 

Get Creative with Funding Options

Bad credit business loans are not the only way of obtaining the funding you need. As mentioned previously, an MCA (Merchant Cash Advance) is much easier than obtaining a traditional loan. Family and friends are another sources where you may be able to find financing. 

Provided that you do secure a bad credit business loan, and then maintain it by making timely payments and ultimately paying it off, the next loan application is more likely to be approved, and with better terms.  

If you’re now ready to proceed in seeking a bad credit business loan, speak with one of the Franklin Merchant Capital loan specialists today for FREE. Simply apply here to see how much funding you qualify for.  Let us help you get the funds you need. 

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Useful Links

Best Ways Consolidate Business LoansMerchant Cash AdvanceBad CreditAll BlogsConsolidation Loan ProgramsFinancing Options For Small Business