Business Lines of Credit for Borrowers With Bad Credit

A business line of credit can be used for a variety of short-term needs, such as managing cash flow gaps, covering emergency expenses and taking advantage of unexpected opportunities. These small business loans can be a good option for many different business owners — including those that have bad credit.

Although it likely will be more difficult to get a business line of credit with bad credit, there are still options available from online lenders.

Yes, there are business line of credit options available for borrowers with bad credit (a credit score between 300 and 629). Although banks tend to require strong credit, online lenders are usually more flexible. These lenders may place less emphasis on your credit and instead consider factors such as your annual revenue, time in business, cash flow and sales projections.

Nevertheless, you’ll still likely need a minimum credit score of 600 to qualify for most online lines of credit.

To access the best rates and terms — and increase your chances of qualifying — it can be helpful to try and improve your credit score before applying. To improve your credit, you can:

• Pay down or pay off debt.
• Make debt payments more frequently.
• Look for errors on your credit report and report them to the appropriate credit bureau.

It can take time, however, to see meaningful improvements to your credit score. If you need access to capital sooner rather than later, you can apply for a business line of credit from an online lender that has flexible qualification requirements.

To get one of these products, lenders will consider factors such as:

The more revenue you can show, the more likely you will be to qualify for a business line of credit (bad credit aside) and the more affordable interest rates you’ll be able to receive. A high revenue proves to lenders that your business takes in enough to pay back any capital you may draw from your credit line.

The longer your business has been operating, the better. Lenders use your time in business as a measure of success. If you have a history of successful operations, it’s more likely you’ll be able to repay your debts.

It can be useful to provide collateral to secure your line of credit, even if it’s not required. Collateral provides additional security for the lender — if you can’t repay what you’ve borrowed, the lender can seize your collateral to recover their losses.

When you’re applying for a business line of credit, especially with a bad credit score, lenders will want to know how well you manage your cash flow—and how much cash you tend to keep on hand.

Because a lender’s main concern is whether you’ll be able to make your loan payments, demonstrating that your business makes and keeps enough money to afford those regular expenses will go a long way to helping you qualify for a business line of credit for bad credit.

If you’re currently paying back a business loan, you may have trouble qualifying for a second loan. This is because most lenders don’t want to take what’s called “second position” to another lender.

In other words, if your business goes bankrupt and your assets are liquidated, the original lender will be compensated for your remaining debt, leaving the second lender in an unfortunate position. If a lender takes a second position, it means they wouldn’t get their money until the lender in the first position is completely paid back.

Therefore, many lenders will be looking to confirm that you don’t have any other debt obligation at this time. If you do have existing debt and are looking for financing options, you may consider refinancing your existing loan or exploring a business debt consolidation loan.

Decide how much capital you need and how quickly you need it. If you can wait to get funding, it will be helpful to take time to build your credit score — as this will allow you to access more competitive rates and terms.

Look at where your business stands in terms of the most common eligibility criteria, including credit score, annual revenue and time in business. Even if you have a low credit score, showing strong qualifications elsewhere will help you access the best line of credit options.

Research and compare multiple lenders to find the right fit for your needs. You’ll want to find a lender whose requirements you can meet and one that offers the funding you’re looking for. It may be useful to read reviews online to get a better sense of what it’s like to work with a particular lender.

Most online lenders offer streamlined application processes with minimal documentation. You may be able to connect your financial accounts directly to a lender’s platform in lieu of uploading documentation.

In general, however, you may need to provide:

• Basic information about you (the business owner), such as your Social Security number and a copy of your personal identification.
• Basic information about your business, such as your Employer Identification Number.
• Personal and business bank statements.
• Personal and business tax returns.
• Business financial statements, such as a profit and loss statement and balance sheet.

Some online lenders can approve your application within the same day and issue funding within 24 hours.

You don’t have to go through your funding search alone — we can help. Just answer a few simple questions, with no impact to your credit score and no obligation, and see which lines of credit you qualify for. Our trained sales associates will walk you through the entire process and help you find the best fit for your needs.