Can You Get a Small Business Loan with Bad Credit?

By Aries Payne

Starting a new business is exciting, but it often requires funding. While some entrepreneurs can raise the capital needed for startup costs, a loan is often necessary to cover everything owners need to get the new enterprise off the ground. 

Traditionally, a good credit score was one of the prerequisites for securing a small business loan. But what if your credit isn’t perfect? Fortunately, there are options for business owners with less-than-ideal credit scores, and lenders may look at other factors besides credit history to determine your eligibility for a loan.

Funding Options for Business Owners with Bad Credit

Even if your credit score isn’t where you want it to be, you still have funding options, ranging from traditional small business loans to grants. 

Small Business Loans

Regarding standard loan options, business owners with low credit may qualify for short-term loans, which may be appropriate if you need funding for more immediate needs. The approval process usually happens quickly, so borrowers may receive funds within a few business days. 

Although a quick turnaround may sound appealing, the risk associated with bad credit means that short-term loans may come with higher interest rates. Additionally, shorter repayment terms may not be feasible for your current cash flow unless you plan to repay the loan as soon as possible.

That said, we highly recommend that you speak with a business advisor first before seeking out short-term loans for your organization. They can offer guidance on how to improve your credit to become eligible for loans with more desirable interest rates. 

SBA-Backed Loans

The SBA helps connect eligible borrowers to lenders with government-backed loans with lower interest rates and longer repayment terms. Additionally, these lenders will consider factors beyond your credit score, like your financial history, business revenue, and growth potential. 

While this is a more affordable option for business owners with low credit, it’s worth noting that approval is not guaranteed. Because of the appealing terms SBA-backed loans can offer, they can be competitive, and the application process may be more complex compared to other options. 


There are also several grants Texas business owners may be eligible for, including:

Because business grants don’t focus on credit scores as loans do, this option can benefit owners seeking startup capital or funding to grow their enterprise. However, there are limitations—primarily that they can be competitive. A strong business plan and a history of responsible financial management will be essential to improving your chances of being awarded a grant. 

Find Funding for Your Small Business

Don’t let your credit history stop you from chasing your dreams of owning your own business! If you need assistance finding funding, creating a bankable loan proposal, or improving your credit, contact your local SBDC and request an appointment with one of our business advisors for no-cost resources and guidance. 



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