According to a report published by the Small Business Administration, over $10 billion was loaned to small businesses between January 1 and April 17, 2020, in the form of 7(a) loans. In the same 4.5-month period, over $55 million was loaned in the form of Community Advantage loans and over $3.3 billion was loaned in the form of 504 loans.  Unfortunately, not every small business owner that needs a loan is qualified to take out an SBA-backed loan. Lenders that work with the SBA require minimum credit scores ranging from 650 to 680. If your business hasn’t operated for a full year yet, your personal credit score will be the primary deciding factor in the type of bad credit business loans you qualify for, the repayment terms, the APR, and your likelihood of approval. However, there are things you can do to increase your odds of getting approved and receiving a favorable rate.


Check Your Credit Score

If you need a small business loan, the first thing you should do is check your credit. If you’ve been in business for over a year, check your business credit score. If not, check your personal credit score. Identify any errors that can be disputed to raise your credit score. For information on how to dispute errors with any of the three major credit agencies, here is a great resource.

Write a Business Plan

Not all potential lenders require a written business plan as part of their loan application process. However, particularly if your business is relatively new or your credit score isn’t the best, a clearly articulated business plan will help you secure bad credit business loans. This shows a potential lender that you have a reasonable plan in place to pay them back. A solid business plan will make you look less risky in their eyes and you may qualify for a larger loan or lower interest rate.


Build Your Business Credit

If you have been in business for at least 12 months, your business will have a credit score. If you were ever late paying your vendors, rent, or utilities, your late payment or payments may have been reported to Equifax, TransUnion, or Experian. This history of late payments will reduce your business credit score.

One way to build or repair your business credit score is to take out a business credit card if you do not have one already. Put expenses on this credit card and pay it off in full every month. These on-time payments will be reported to the three major business credit bureaus, and your business credit score will increase. More importantly, your business credit history will look stronger. If you don’t qualify for a business credit card yet, ask your suppliers to provide you with trade credit and ask them to report to the credit bureaus.

Improve Your Personal Credit Score

Disputing any errors you find on your credit reports is a good start to improving your personal credit score. But once your reports are accurate, only hard work and time will improve your personal credit score further. If you have any delinquent accounts, bring them current as quickly as possible. At the same time, do not fall behind on any of your other bills, including utilities and rent.

For the best personal credit score, you should have at least one revolving loan, one installment loan, and a credit utilization rate of no greater than 30%. It is also important to note that your credit score will improve over time as you continue to make on-time payments. When it comes to your credit score, your payment history is weighted the heaviest at 35%. If you must pay a bill late, make sure you pay it within 30 days of the due date so your late payment is not reported to the credit bureaus.


If you are a small business owner with bad credit that needs access to capital, there is hope. For help with a business loan, even with less-than-stellar credit, please contact us today at RidgeStone Capital to learn how we can help.

Recent Posts

Understanding the Basics of Car Wash Financing

Understanding the Basics of Car Wash Financing

When it comes to building or expanding a car wash business, securing the necessary financing is a critical step in the process. However, the world of car wash financing can be complex and daunting, with a myriad of factors to consider and decisions to make. Whether...

read more
Section 179 Deduction for Small Business

Section 179 Deduction for Small Business

Maximizing the Benefits of a Section 179 Deduction for Your Small Business Navigating the complex terrain of taxes can be a daunting task for many small business owners. Yet, understanding and effectively utilizing certain tax provisions can frequently yield...

read more