This guide outlines the best business loan options available with a 500 credit score and offers tips to improve your chances of qualifying.
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Types of business loans for a 500 credit score
Online and community lenders may be willing to issue business loans to borrowers with a 500 credit score. These lenders are often more flexible with their qualification requirements and offer fast access to funding.
Here are some of the common loan types available to borrowers with lower credit scores:
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Microloans. These loans are typically offered by nonprofit or community lenders, which focus their lending efforts on traditionally underserved businesses. Microloans are usually available in amounts up to $50,000 and function like term loans. Although these loans may have shorter repayment terms and higher interest rates than traditional business loans, they’ll likely be the most competitive option for borrowers with a 500 credit score.
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Invoice factoring. Invoice factoring isn’t technically a loan — instead, you’re selling your outstanding invoices to a factoring company in exchange for an advance of capital. The company assumes responsibility for collecting repayment on your invoices, and once it receives that payment, it sends you the difference, minus the agreed-upon fees. Eligibility for invoice factoring is usually based on the creditworthiness of your customers, as well as the value of your invoices — as opposed to your credit score and other traditional requirements.
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Merchant cash advances (MCAs). Similar to invoice factoring, MCAs aren’t really business loans. With an MCA, you receive an upfront sum of cash that you repay using a percentage of your debit and credit card sales, plus a fee. Because repayment comes from your card sales, MCA companies usually focus on those transactions, or your business revenue, when evaluating your application. As a result, many MCA providers accept borrowers with lower credit scores. Merchant cash advances are often one of the most expensive forms of business financing, however, and should be considered a last-resort option.
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Payment processor loans. Also known as merchant financing, these loans are issued by companies that process customer payments, like PayPal or Square, usually exclusively to their customers. Repayment is collected directly from the seller accounts (similar to the way an MCA works) and approval is based on your sales with the processor.
Best business loans for a 500 credit score
A closer look at our top picks
🔍 Overview:
✅ Requirements:
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Minimum credit score: No minimum.
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Minimum time in business: 3 months.
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Minimum annual revenue: $18000 (at least $1,500 per month).
🔍 Overview:
Expansion Capital Group issues merchant cash advances up to $300000. Advances are repaid between 3 and 12 months. You may be able to receive funding on the same day you’re approved.
✅ Requirements:
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Minimum credit score: 500.
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Minimum time in business: 6 months.
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Minimum annual revenue: $100000.
Best for no personal guarantee
🔍 Overview:
✅ Requirements:
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Minimum credit score: 475.
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Minimum time in business: 6 months.
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Minimum annual revenue: $102000.
🔍 Overview:
AltLINE allows business-to-business companies to factor up to $5 million in invoices per month. The lender will accept invoices that are outstanding for up to 90 days. You can receive funds within 24 to 48 hours of invoice submission.
✅ Requirements:
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Minimum credit score: No minimum
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Minimum time in business: No minimum.
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Minimum annual revenue: No minimum..
🔍 Overview:
✅ Requirements:
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Must have a PayPal Premier or PayPal Business account for at least 90 days.
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At least $15,000 in PayPal sales in the past year ($20,000 for Premier accounts).
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No minimum credit score requirement. PayPal doesn’t perform a credit check because the loan is based on your PayPal account history.
🔍 Overview:
Kiva is a nonprofit microlender that offers interest-free loans of up to $15000. To get a loan from Kiva, you must create a crowdfunding campaign and gather support from your community. After your friends and family provide initial funding, you’ll expand your campaign onto the Kiva platform, where anyone can lend you money. Once your fundraising is complete, you receive your loan and have between 12 and 36 months to repay them.
✅ Requirements:
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Must live and do business in the U.S.
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Must be 18 years or older.
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Must have a PayPal account.
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Must be able to demonstrate your social capital by asking friends, family or customers to donate to you during the private fundraising period.
Kiva does not set any minimum credit score, annual revenue or time in business requirements.
🤓 Nerdy Tip
Although there are reputable lenders (like the ones on our list) that offer business loans for a 500 credit score, there are also bad actors who try to take advantage of bad-credit borrowers who need funding. As you compare options, keep an eye out for red flags, such as lenders who request money upfront, guarantee your approval, rush you through the application process, pressure you to sign the loan or offer terms that are “too good to be true.”
How to get a business loan with a 500 credit score
If you have a 500 credit score, there are actions you can take to boost your chances of getting approved:
Work to improve your credit score, if possible
Improving your credit score can take time, so it may not be feasible if you need funding right now. But, raising your credit score can help you qualify for more loan options, as well as better interest rates and repayment terms.
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Look for errors on your credit reports (e.g. payments marked late when you paid on time, someone else’s credit activity mixed with yours) and dispute them with the appropriate credit bureau.
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Make debt repayments more frequently.
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Get added as an authorized user on a credit card of someone you know and trust who has a strong credit score.
Provide a comprehensive business plan
If you have a lower credit score, you want to do everything you can to strengthen your application — and show the lender that you’ll be able to repay the loan. A well-thought-out business plan can help persuade lenders that your company has staying power and is a worthwhile investment.
