The average interest rate for small business loans for bad credits can rise to more than 99%. Having a fair credit (FICO score below 669) makes it more difficult, but not impossible, to find a business loan with competitive interest rates.
Luckily, poorly credited business owners have business loan options. Options such as Small Business Management (SBA) and obtaining loans that microloans support for bad credits can help you lock at a lower rate. Start by comparing low-interest rate SME loan options with lender requirements.
Compare the best low interest rate small business loans for poor credit
If you need a bad credit business loan, we recommend that you look into these six options first.
|
Loan Options |
It’s perfect for |
Bankrate score |
|
SBA 7(a) Loan |
Business with fair credit |
4.8 |
|
SBA Micro Loan |
Inadequate community |
4.8 |
|
Accion Opportunity Fund |
Low interest loans |
4.1 |
|
Funding |
Credit business line |
4.7 |
|
Kiba |
Profitless period loan |
4.2 |
|
creditfy |
Equipment Loan |
4.7 |
SBA 7(a) Loan: Great for businesses with fair credit
interest rate: Up to 15% for variable loans, up to 15.5% for fixed-rate loans;
SBA loans are the perfect place to start if you are looking for a low-interest business loan for a fair credit borrower. 7(a) Loan Program is the primary way to support SBA small business loans. The maximum loan amount is $5 million, which could be a game changer for many small businesses.
The SBA does not act as a lender. Instead, the agency will support the loan. This reduces the risk to lenders and is willing to provide SMEs with fair credit business owners.
Finding an SBA loan for fair or bad credit can take some time, as many SBA lenders have strict eligibility requirements. Some lenders like Rendio are willing to work with business owners with fair credit. For SBA loans, Rendio’s credit score requirement is 650, and requires at least two years of business.
How to qualify for an SBA 7(a) loan
To qualify for an SBA 7(a) loan, you must be a small, for-profit business operating in the US. There are no good government loans. The SBA typically wants to prove this in at least two years of operation. This means that 7(a) loans are generally not a suitable small business loan for startups
Beyond that, many eligibility criteria result in specific requirements for lenders. SBA 7(a) You can use the SBA lender match tool to pair with your lender and learn eligibility criteria.
SBA Microloans: Great for underserved communities
interest rate: Usually 8% to 13%
Standard 7(a) loans supported by the SBA have a wide range of borrowings. Standard 7(a) There is no minimum set published for SBA-backed loans, but the minimum amount offered may be too much for your business needs. Fortunately, this does not mean you need to miss out on the support of the SBA and the associated low interest rates.
The SBA also guarantees microloans. The microloan earns $50,000, with an average loan amount of around $13,000. The maximum repayment terms will be within 7 years.
These loans are issued by nonprofits and community-based organizations designated by the SBA. As a result, they are perfect for minority business owners and people who run their businesses in underserved communities. Many microrenders relax eligibility requirements and offer low interest rate microloans with poor credit or no credit history.
How to qualify for an SBA microloan
The SBA allows organizations to fund eligibility criteria that qualify for loans, and therefore need to find designated intermediaries to cooperate. The lender will inform you of the eligibility requirements and the process of applying for an SBA microloan. A complete list of SBA certified microrenders can be found here.
Generally, microrenders can accept low credit scores in businesses at the startup stage at 500, but business requires longer hours.
Accion Opportunity Fund: Ideal for low-interest term loans
interest rate: 8.49% to 28.99%
The Accion Opportunity Fund works to increase funding equity. The nonprofit states that over 90% of its clients are diverse business owners (women, people of color, and business owners operating in communities with low incomes).
The Accion Opportunity Fund offers small business loans from $5,000 to $250,000 for 12-60 months of repayment terms. The lender accepts a minimum annual revenue of $50,000 for a year in a business that is much less than most lenders need. The company says it is an option for low credit business loans as it considers more than a credit score when deciding whether to fund a loan.
How to qualify for the Accion Opportunity Fund Small Business Loan
You can apply for an Accion Opportunity Fund loan online. You can have key financial documents at hand, such as past tax returns and statements from your business check accounts, and you can extract details from them.
After applying, the Accion Opportunity Fund will provide you with the options you are entitled to. From there, you can choose the best one for your company.
Funding: Perfect for your business line
interest rate: Starts at 0.75% per month
Funding specializes in bad credit business loans. We offer several types of small business loans, including a business line that includes a loan amount of up to $250,000 and a simple interest rate starting from 6.00%.
According to a spokesperson, they work with fundraising people and business owners with a credit score of 450. When it comes to all kinds of small business loans for bad credit, other lenders aren’t that low.
How to Qualify for a Fundable Business Line
Be prepared to show a 3 month business bank account statement that certifies your average monthly revenue. Beyond that, you can complete the application process online. This only takes a few minutes.
Bonus: If approved, you can receive funds on the same day.
Kiva: Perfect for term loans without profits
interest rate: 0%
Kiva is not a traditional lender of bad credit business loans. However, if you are looking for a low-interest business loan for poor credit, this is an invincible option. Money passing through Kiva comes with a 0% interest rate.
This money will not come to you from traditional lenders. Instead, use crowdfunds using the Kiva platform. This means asking friends and family to pitch.
The amount you can raise through Kiva Maxes is $15,000 and must be repaid within 36 months. However, Kiva loans come with serious perks to compensate for these restrictions. This is a business loan with no annual revenue requirements and no minimum business time requirements. As a result, if you are looking for a startup business loan, crowdfunding Kiba money could be your solution. Since there is no minimum credit score requirement for Kiva, check the box for low interest business loans for bad credits.
How to qualify for a crowdfunded Kiva loan
Again, there is no credit score, business time, or annual revenue requirements here. Instead, you will need to get enough initial buy-in for Kiva to publish the loan. After filling out the initial application form and receiving the loan setup on the Kiva site, you will have 15 days to receive funds from a circle of family and friends.
Essentially, Kiva uses contributions from networks (friends, family, etc.) to verify creditworthiness.
CreditFy: Perfect for equipment loans
interest rate: Simple interests between 4.90% and 34.00%
There’s a reason why Creditfy has created a list of the best equipment loan lenders. It offers low interest rate business loans to bad credit borrowers that you can use to fund 100% of your equipment purchases. In other words, you don’t have to come up with a self-pay for a down payment.
CreditFy says it has approved 90% of equipment loan applicants. If your minimum credit score is 500 and you have 6 months of lowest business hours, this can be a good option for small business loans for bad credit startups.
How to qualify for a CreditFy Equipment Loan
They can apply for funding for CreditFy equipment online, and the company says the process only takes around five minutes. You will need to contact us within a few hours after submitting your application. The loan advisor will look into the options that are eligible.
Low Interest Business Loan Alternatives for Bad Credit
While bad credit borrowers clearly have some low interest rate business loans, getting a loan is not your only option. You can also look into:
Business Credit Card
The best SME credit cards are usually reserved for business owners with excellent or excellent credit. You can find several unsecured business credit cards for business owners with fair credit, such as Capital One Spark 1% Classic. These don’t have the best perks found on other business credit cards and usually have a higher fee.
If you are not qualifying for a lower interest business loan at a better rate, these cards are solid choices that will help you cover your short-term costs. Unlike business loans, you can avoid interest fees by paying the full monthly amount. This not only saves you money, but it is also a low-cost way to build business credits.
Business grants
Small and medium-sized enterprise subsidies are basically free money. You get cash in your hands, but you don’t have to pay it back. Grants are entitled to the grant itself, as they tend to be competitive among business owners.
You can narrow down your competition by applying for grants designed for your industry, business, or specific demographics. For example, you can apply for grants for minority business owners.
Personal loan
You don’t necessarily need to experience the business to improve your company’s cash flow. Most personal loans can be used in any way, including investing in your business. You will want to check out the fine prints to ensure that you can use your personal loan for business purposes. Additionally, some personal loan lenders, such as Upstarts, have very low eligibility requirements, such as a minimum credit score of 300.
How to choose a low interest business loan for bad credit
As we are assessing low credit business loan options, it’s helpful to have some guidance in mind. Follow these steps to find the right option for your company.
- Reconfirm lender requirements. Many online lenders will tell you what you qualify for their funding on their website. If you are unsure, you can call and ask at any time. Also, if you don’t know your credit score, check your credit score first to compare it with your lender.
- Compare interest rates with other loan costs. Make sure you are comparing apples to apples here. For example, some loans may come with a factor rate. Ideally, you would like to convert these into annual rates (APRs) to compare similar costs. You will also need to check additional fees, such as origination fees, to ensure you understand the full cost of each loan.
- Check the loan amount. Make sure your lender offers loans that cover your financing needs. You also need to make sure that the minimum loan amount offered by lenders is not too high enough to suit small businesses.
- Make sure your repayment timeline works for you. Some loans have a short repayment timeline (such as 12 months), while others, such as SBA 7(a) loans, give you over 10 years to pay back what you borrow. More time means reducing your payments, but it also means paying more interest over the life of your loan. Consider whether your loan payments fit within your business budget and whether you’re saving the most money possible.
Conclusion
A variety of low-interest business loans are available to poor credit business owners, including SBA microloans and crowdfunding via Kiva. Additionally, some lenders work to offer low-cost options. Whichever loan or lender you choose, understand the full cost of your loan and how paying it down fits into your overall business plan.
