Struggling With Bad Credit? 7 Smarter Ways to Secure Small Business Funding in 2025

Below, learn more about the available options, eligibility criteria, requirements, and how to strengthen your chances—especially for minorities and those launching their first business in 2025.

Key Realities About Bad Credit Startup Loans in 2025

Legitimate lenders in the USA, including banks, credit unions, online lenders, private lenders, and government programs, conduct some form of risk assessment for startup loans, even for applicants with bad credit. There are no “guaranteed” startup loans for bad credit. Be cautious of offers that promise approval without any checks or request upfront fees, as these may be scams (Nav, Bankrate).

Exploring Funding Options for Startups With Bad Credit

1. Alternative & Online Lenders

Who They May Benefit: Startups with lower personal credit scores (approximately 450–600) but some business sales or revenue.

• Features: Fast decisions and possible funding within 24–72 hours. These lenders often focus on recent business revenue, not just credit scores.
• Requirements: At least $5,000–$10,000 in monthly revenue and 6+ months in business are typically needed.
• Products Offered:
  • Short-term business loans
  • Lines of credit (maximums often around $150,000)
  • Merchant cash advances (with daily or weekly repayments)
• Costs: Generally higher annual percentage rates (sometimes above 50%) and possible origination fees (2–4%).

Note: Many online lenders require a personal guarantee, meaning you would be personally responsible if your business defaults.

2. Merchant Cash Advances & Revenue-Based Financing

Who They May Benefit: Businesses with less-than-perfect credit but consistent, strong revenue.

• How It Works: Borrowers receive immediate cash in exchange for a portion of future sales.
• Providers: Options include companies such as Credibly, Giggle Finance, and Revenued Flex Line.
• Requirements: Substantial recurring revenue (for example, $10,000 or more per month).
• Pros: Quick access to funding with minimal credit review.
• Cons: Fees can be high; repayment is frequent (usually daily or weekly).

3. Microloans from CDFIs and Nonprofits

Who They May Benefit: Startups, minorities, and underserved groups with limited or poor credit history.

• Providers: Examples include CDFIs, Kiva, Accion Opportunity Fund.
• Amounts: $1,000–$50,000 (sometimes up to $150,000 for returning borrowers).
• Interest: Some, like Kiva, offer 0% interest; others may charge modestly higher rates.
• Requirements: Certain programs (such as Accion) may require at least a year in business and basic revenue (for example, $50,000/year).
• Benefits: More flexible toward credit and supportive of first-time and minority business owners.
• Funding Speed: These loans often take longer to obtain than those from online lenders—sometimes up to a few weeks.

4. Private (Hard Money) Lenders

Who They May Benefit: Startups capable of providing collateral, those with challenging credit, or those excluded from other types of financing.

• Collateral: May include real estate, equipment, or personal property.
• Cost: Typically higher fees and interest rates, with loan amounts dependent on collateral value.
• Availability: Varies by region and lender; research and diligence are advised.

5. Non-Credit-Based and Transaction-Based Loans

• Examples: Some lenders, such as PayPal Working Capital, focus on business transaction history rather than credit score but require a history (for example, $15,000 in PayPal sales and at least 90 days with a PayPal account).
• Suitable for: E-commerce or service businesses with consistent payment platform revenues.

Steps to Build Business Credit Efficiently

Challenges with personal credit are common for startups—but it is possible to begin establishing business credit in a relatively short timeframe:

1. Apply for Net-30 Vendor Accounts: Many vendors or suppliers allow purchases to be paid within 30 days; some report payments to business credit bureaus (such as Dun & Bradstreet, Experian, or Equifax).
2. Secured Business Credit Cards: If you aren’t eligible for an unsecured card, consider a secured card (which requires a cash deposit). Responsible use and on-time payments can build credit.
3. Pay Bills Promptly: Timely payment is the most important factor in building business credit.
4. Monitor Your Business Credit: Use available services to track business credit scores. Established scores are often necessary for loan approval.

Funding Programs Supporting Minorities and Underserved Groups

In 2025, microloan programs, CDFIs, and nonprofit lenders may be especially accessible for minority business owners with limited credit history. These programs often support:

• Black, Latino, women, and Indigenous business owners
• Low-income and first-time entrepreneurs
• Startups with non-traditional models

For example, Kiva offers 0% interest loans of up to $15,000 with no credit check, and Accion conducts soft credit checks with a flexible review process.

Overview of SBA, Government, and International Loan Options

• SBA Microloans: These may be somewhat more accessible than standard SBA 7(a) loans, but generally, a minimum FICO score of around 640 is required.
• Government Lines of Credit: Most U.S. government programs in 2025 require fair to good credit, and startup offerings for applicants with poor credit remain limited.
• International Startup Loans: Conventional U.S. lenders rarely provide startup loans to international founders with bad credit. Exceptions may exist for those with significant U.S.-based operations or partners, but obtaining funding in such cases can be more challenging.

Preparing Your Application: Common Requirements

Typical documentation and requirements include:

• An EIN, legal business entity, and business bank account
• Documentation of recent business revenue (such as bank statements or sales reports)
• Personal identification and Social Security Number (if a personal guarantee is needed)
• Documentation for collateral (for secured or hard money loans)
• Proof of time in business (ranging from 3 to 12 months, depending on lender)

Tips for Applicants:

• Higher rates and more frequent payments are common; be sure to understand all borrower obligations.
• Review terms and all fees carefully before moving forward.
• If building business credit is important to you, confirm that your lender reports to appropriate credit bureaus.

Understanding Costs and Risks

• Interest Rates/APRs: Loans for applicants with poor credit typically involve higher rates, sometimes above 50% annualized.
• Origination Fees: Often 2–5%, deducted from your loan proceeds.
• Repayment Schedules: Some products, such as merchant cash advances or revenue-based loans, may require daily or weekly payments.
• Personal Guarantee: In many cases, you are personally liable if the business cannot repay.

Staying Safe from Scams and Predatory Offers

• Avoid paying upfront fees to lenders promising “guaranteed approval.”
• Verify the legitimacy of lenders and review their policies before providing sensitive information.
• Utilize reputable organizations such as CDFIs, SBA partners, and established online lenders.

Summary Points as You Plan for 2025

• Guaranteed startup loans for bad credit are not available through legitimate sources.
• Alternative and online lenders may offer fast funding to businesses with challenging credit and proven revenue.
• Microloans and CDFIs may be a supportive resource, particularly for true startups and minority founders.
• Taking steps to build business credit early can expand future financing opportunities.

If you are just getting started, consider focusing on revenue growth, establishing business credit, and working with alternative finance products to build a history that may qualify you for larger loans down the road.

Sources

• Bankrate: Best Bad Credit Business Loans in 2025
• Nav: Bad Credit Startup Business Loans (2025)

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