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Imagine having a terrific business idea you’re certain will pave the way to success, demonstrate your business know-how, and display your industry acumen. These kinds of big ideas call for even bigger dreams, bold aspirations, and a whole lot of cash. Sadly, many of these dreams do not come to fruition because of a lack of sufficient funds or places from which to borrow them. When that happens, even the most fantastical of ambitions can turn into dreams deferred.

Generally speaking, the financing required to start a business can be acquired through several sources. Many people seem to think that bank and credit card loans are the best places from which to borrow money. That is simply not true, particularly for folks with bad credit scores. Most lending agencies avoid loaning money to people with bad credit, including those with low-to-no credit, due to faulty business dealings or personal banking matters.

Despite the very real risks of loaning money to individuals with bad credit, there are plenty of entrepreneurs with less-than desirable scores who do manage to take out loans and become the successes they knew they could be. So how do they do it?

Business Loan Options

There are a number of ways to finance a business, even with credit scores that leave much to be desired. Some lending options cost more in the short term because they require borrowers to demonstrate their best good faith efforts to repay the money, as well as a desire to start and grow their business. Nevertheless, here are just some of the ways in which individuals with low or bad credit can secure business loans.

Bank Loans

Although taking out a bank loan is probably an unlikely option, there are financial institutions willing to help struggling businesses get their feet in the door, even with credit scores below 620. Impediments to securing a bank loan include a history of late payments, foreclosures, repossessions, or debt. Still, you may be able to qualify for a bank loan if you are willing to pay it back at a higher-than-normal interest rate, have the documentation that supports your ability to pay the loan back, as well as proof of a consistent cash flow.

Friends and Family

Doing business with friends and family can be tricky, but it can also be your saving grace. Unlike banks and other financial institutions, the people who know and love you are far less likely to base your worth and earning potential on credit scores and financial mishaps alone. In many cases, their respect for your industriousness and desire for growth is likely to help you win them over, and in turn provide you with the income you need to get started.


Short term business loans for amounts of $50,000 or less are often available to business startups with low capital. The risks involved with these kinds of loans are lower because the ask amount is usually far less than what is typically requested. This is true in general as well as specifically for the lending institutions that provide them.

Web-based Lenders

Non-bank lenders found on the internet are another avenue businesses in need of a loan can explore, even if their credit scores are low. Web-based lenders are not only accessible to those who might otherwise be turned away by brick and mortar banks. They are also likely to report prompt payments to the institutions that affect, and can ultimately improve, your credit score.

Peer-to-Peer Lending

Peer-to-peer lending involves multiple investment sources who loan money to one individual, cause, institution, or project. Despite the number of people who may be involved with the loan’s provision, borrowers only have to issue one payment to the group on a monthly basis. Ultimately, this allows for maximal support at no additional cost to you.

Merchant Cash Advances

This kind of loan requires a bit of forward thinking, as the amount lent to you is based on expected vs. actual profits. Merchant cash advances for businesses can be paid back in one lump sum or separate payments, depending on how well your business performs.

Invoice Financing

Last but certainly not least, is invoice financing. In this scenario, your lender pays for invoices not yet issued to consumers. This provides you with a cash advance from the money that will be earned and invoices represent actual purchases. This type of financing offers you a percentage of the money that you will owe, as well as incentive to do and be the best in your business.