If you’ve got bad credit, getting a business loan from a bank or other traditional lender can be difficult. But that doesn’t mean you won’t be able to find funding, as some alternative lenders specialize in bad credit business loans.
In this guide, we’ll compare loans from six reputable business lenders and show you how to get a business loan with bad credit.
If you need an unsecured business loan and you have a low credit score, you’ll have a much better chance of getting approved by alternative lenders than financial institutions. Rather than honing in on your credit score, alternative lenders will take a look at your overall financial situation. They can consider your application as long as you can demonstrate you have the means to repay what you borrow. However, watch out for steeper rates.
Founded in 2009, Merchant Growth specializes in fast financing solutions for small businesses. There's no collateral required to apply for a loan, and bad credit won't automatically disqualify you from qualifying for financing. Once you're approved, the money you borrow will be available to use within 24 hours. Full Review
It can be more difficult to get financing as a startup because new businesses may not be generating as much revenue as more established businesses. Applying to a business loan broker such as Loans Canada can help startups narrow down their choices and find a lender willing to provide financing.
Loans Canada is an online loan broker that allows you to fill out a single application and then compare loans from a network of lenders. There are options available for good and bad credit, with same-day approval and next-day funding if you need money in a hurry. You can access installment loans, lines of credit, commercial mortgages and a range of other business financing options through Loans Canada, and applying through the broker won't incur any fees. Full Review
Alternative lenders are faster than banks and credit unions when it comes to approvals and funding. Because they have less strict requirements and require fewer documents, they can complete the process within 24 to 72 hours, even for bad credit applicants. Some lenders can provide a quote right after you apply without affecting your credit score.
Journey Capital is an online business lender that is headquartered in New York City, but it also has Canadian offices in Toronto and Montreal. It takes about 10 minutes to fill out an online application, and loan options include business term loans, business lines of credit and flex funds advances (small business advances with flexible terms and daily payments). However, it's worth noting that Journey Capital may be less flexible than some other lenders on this list because you'll need a credit score of at least 600 to apply for financing. Full Review
Easy application process
Get money within 24 hours once approved
No personal collateral needed to apply for a loan.
A merchant cash advance is a common type of business financing for bad credit. You get a lump sum that you repay based on a percentage of your future sales (via customer card receipts). You make repayments daily, weekly or monthly. A fee is added to the percentage of your sales.
2M7 Financial offers an alternative to business loans in the form of merchant cash advances. It has been in business in Canada for at least 13 years and has a 97% approval rating on all submitted applications. Apply online and get funding on the same day. Full Review
Same day funding
Easy online application process
Repay based on your cash flow
No collateral needed
Expensive
Short-term financing
Loan amount
$10,000 – $250,000
APR
N/A
Term
3 - 6 months
Interest Rate Type
Fixed
Min. Credit Score
550
Fees
There is a one-time “factor rate” fee that’s between 1.18 and 1.48 and is multiplied by the amount of your cash advance to determine the total amount that must be paid back. This is the only fee you’re charged for your cash advance.
Turnaround Time
A few hours up to two business days, depending on how accurate and complete your application is
With business term loans, you get a one-time loan upfront that you’ll pay back weekly, bi-weekly or monthly over several months or years. If you have bad credit, lenders will approve you for smaller amounts. You can increase your chances of approval if you sign a personal guarantee, offer a down payment or provide collateral.
SharpShooter Funding is an online lender that provides funding for businesses across Canada. This lender bases its decisions on the overall financial health of your business rather than your credit score, and you can apply online to get pre-approval within minutes. There's also a wide range of bad credit business loans available, from term loans to lines of credit. Full Review
Get the money you need in less than three days
Bad credit isn't a factor for most loans
Easy online application process
No collateral required.
High rates for bad credit
Some products (such as long-term loans) have stricter eligibility requirements
No branches if you prefer to deal with your lender face-to-face.
Loan amount
$1,000 – $300,000
APR
5.49% – 22.79%
Term
12 - 60 months
Interest Rate Type
Fixed
Fees
$35 NSF fee $45 incoming wire fee
Turnaround Time
48-72 hours
Serviced Provinces
All of Canada
Best business loan for flexible financing
There are several ways to inject financing into your business, such as merchant cash advances, term loans, lines of credit and invoice factoring. What you’ll get approved for when you have bad credit will depend on what’s reduces risk for the lender. Generally, financing that’s secured by collateral, such as equipment, cash and customer invoices, is easier to get approved for.
Greenbox Capital is a lender that offers different alternative financing solutions for small businesses. It looks beyond your credit score to assess the financial position of your business and its potential for growth. Greenbox Capital is also known for its fast turnaround time, with funds released in as little as 24 hours. Full Review
Bad credit business loans available
Fast access to funds
Easy to apply.
Short loan terms
High rates for bad credit
You may have to make daily payments.
Loan amount
$500,000 – $3,000
APR
N/A
Term
3 to 12 months
Interest Rate Type
Fixed
Fees
Non-sufficient fund fees, late fees, origination fees.
Serviced Provinces
All except Saskatchewan
We’ve chosen the products on this page based on the providers available through Finder and online in the Canadian business loans marketplace. These loans are not representative of the entire market. When choosing top business loans for bad credit, we considered each lender’s loan amounts, turnaround time, APRs, fees, transparency, customer service, ease of application and perks.
No single business loan will be the best choice for everyone, so compare your options before applying.
What’s considered bad credit?
Lenders will generally look at the personal credit histories of company owners and, if the business is established, they will also look at the business’s credit score and credit report. If you have bad credit – which could come from defaulted payments, missed payments, late payments, multiple credit inquiries and/or a high credit utilization ratio – you may find it difficult to be approved for small business financing, but you have options.
Personal credit score
A bad personal credit score is typically one that’s below 600 (ratings usually range from 300 to 900, with 900 being the best). Credit scores can vary between Canada’s two main personal credit reporting bureaus: Equifax and TransUnion.
Business credit score
Business credit scores can vary between Canada’s three main business credit reporting bureaus: Equifax, TransUnion and Dun & Bradstreet (D&B).
Equifax issues four different business credit scores:
Credit Information score (0-70 where 41+ is high risk)
Business Failure Risk Score (1,001-1,722 where higher is better)
Commercial Delinquency Score (101-662 where higher is better)
Payment Index score (0-99 where 60+ is high risk)
TransUnion’s business credit score ranges from 400-800, with 800 being the best.
The D&B Commercial Credit Score ranges from 101-690, with 690 being the best.
What’s the difference between a personal and business credit report?
Both your personal and business credit report contain information that helps lenders and creditors determine if they want to do business with you. Your personal credit report is based on historical information about your credit accounts such as student loans and credit cards. On the other hand, your business credit report is based only on accounts taken out under your business’s name.
Personal credit report.Your personal credit report includes your name and other personal information, details of consumer credit accounts you’ve held, any negative listings such as defaults or missed payments, and information on the public record such as bankruptcies and court judgements.
Business credit report. Your business’s credit report will include the company’s structure and its shareholders, the company’s credit information including applications and defaults.
Where can you get business loans with poor credit?
If you have bad credit, you can get a business loan from an alternative lender. Here’s why many business owners turn to alternative lenders.
Bad credit history isn’t a determining factor — you just need to show that your business is able to repay.
Responsible borrowers can be rewarded with better rates the next time they apply for a loan.
Loan terms are tailored to what you can afford.
Many alternative lenders don’t require security for the loan amount.
The application is quick, often with same-day approval.
Types of bad credit business loans
Alternative lenders offer different types of business loans for poor credit. These include the following:
Secured bad credit business loans
If you apply using assets as collateral, the lender may be more ready to approve your application. Here are a few things to keep in mind when applying for a secured business loan:
Assets such as business equipment, vehicles, property and funds in savings accounts can be used as collateral for a secured business loan.
These kinds of loans are generally granted by banks, but there are also non-bank lenders who may be able to help. Terms and conditions differ, so it’s a good idea to shop around for the loan that suits your budget.
Since your application is secured with collateral, you generally benefit from more competitive interest rates and flexible repayment terms.
If you can’t make your repayments, the lender will sell your assets to cover what you owe.
If you have outstanding invoices that are locking up your cash flow, you can consider invoice factoring. Invoice factoring involves selling your unpaid invoices for a fee in order to receive the outstanding payments more quickly. This option is popular among business owners because:
Bad credit history isn’t a factor.
No real estate is required as collateral.
You have the option to finance some or all of your invoices.
You can enter into an ongoing arrangement with the factoring company.
Merchant cash advances
A merchant cash advance allows you to borrow cash based on your daily credit card and debit sales. Because these loans are guaranteed by your card sales, you don’t need to put up an asset as collateral to secure the loan.
Features of merchant cash advances include:
Fast approval, with same-day funding offered in some cases but money usually available within three business days.
Your monthly repayment amount varies as it is calculated as a percentage of your monthly card sales.
Bad credit is usually OK.
High borrowing limits are available from many lenders.
You’ll need to watch out for high interest rates and fees.
How to compare bad credit business loans
There are a few bad credit business loan options you can consider. Here’s how to find the one that best suits your business needs:
Flexibility to fit your business cash flow. Small business loans vary in repayment terms, loan amounts and other features. Your cash flow estimates should show when periods of fluctuations occur, and therefore what type of repayment structure and loan type may suit your business.
Affordability of the loan. The APR includes the interest rate and fees that apply to the loan, giving you an indication of the true cost of the loan. You can use a business loan calculator to help you determine whether you can afford it.
Loan term. While banks tend to offer minimum loan terms of one year with standard business loans, alternative lenders have been offering terms as short as three months, giving you a range of terms to choose from. You also have business lines of credit and overdrafts to add to your comparison — each has no set due date.
Features that suit your needs. Identifying your business needs should help when comparing your options. If you have a startup, you may be unsure of your cash flow projections and may want the ability to increase your loan in the future. If you’re taking out a loan to buy stock that will be sold in the next six weeks, you probably won’t want a loan lasting longer than a year.
What do I need to apply for a bad credit business loan?
This depends on the type of lender you apply with. Some new lenders on the market let you connect your business’ accounting software into their systems to allow the lender to make a decision in minutes. Other lenders need your business documents and financial statements to be able to make a decision.
Information you’ll need includes:
Your full name, contact information and SIN number.
Your full business name, address, phone number and email address.
Your industry and the date you started your business.
The annual revenue of your business.
Your personal bank account information and income earned.
If you’re searching for a bad credit business loan, follow these steps to find funding that suits your needs:
Check your credit score. Check your personal and business credit scores to find out exactly where you stand. This will also help you figure out which lenders may be willing to work with you.
Research loan types. Compare different types of bad credit business loans to decide which one best suits your needs. Are you looking for a conventional term loan, for example, or something a little more flexible like a merchant cash advance?
Compare lenders and loans. Next, research lenders that offer the type of loan you want. Compare loan APRs, amounts, terms and fees to find the best deal. And if you’re applying with an alternative lender, check to make sure they’re legit before handing over any personal information. Learn more about business loan scams.
Submit an application. Fill out an application form with your business and personal details. Depending on the lender, you may be able to apply online or be required to visit a branch.
Provide supporting documents. Submit any documents the lender requires to assess your application, including financial statements, your business plan and cash flow projections.
Get approved and funded. Turnaround time depends on the lender and the type of loan you apply for. While it may be possible to get approved and funded within 24-48 hours with an online lender, expect to wait longer if applying with a traditional lender.
How to improve your business credit score and boost your chances of approval
The better your business credit score, the better your chances of getting approved for a loan (and accessing larger loan amounts and lower interest rates). The tips below can help you ensure that your business credit score is in good shape:
Pay on time. Make sure you pay all your bills and invoices on time to build business credit. Paying bills early can increase your score even further.
Improve your personal credit score. If you’re a small business owner, your personal credit score can have a big impact on your business credit score. That’s why it’s a good idea to take steps to improve your credit score, such as correcting errors in your credit report and lowering your credit utilization ratio.
Reduce your credit utilization. If your business credit cards are close to maxed out or you’ve used the full line of credit amount available to you, your credit utilization ratio will be high. This drives your credit score down, so reducing the amount of credit you access will help bring your score back up again.
Check your credit report. It’s good practice to check your business credit report regularly and make sure all the details are correct. If there are any errors, you can dispute them to ensure that everything in your report is accurate.
Government small business loans for bad credit
The Canada Small Business Financing Program (CSBFP) is a federal government initiative designed to help small businesses get loans. How it works is that the Government of Canada shares the risk of loaning to small businesses with lenders, but the loans themselves are approved and administered by lenders.
Features of CSBFP loans include:
Eligibility. Loans are available to Canadian small businesses and startups with gross annual revenue of less than $10 million.
Two types of loans available. You can apply for a business term loan or a line of credit. Term loans can be used to buy commercial property and equipment, pay for leasehold improvements, or buy intangible assets and cover working capital costs. Lines of credit are designed to cover day-to-day operating expenses.
Loan amount. The maximum amount you can borrow is $1.15 million. This includes a maximum of $1 million for a term loan (with further limits on specific expenses the loan can be used to cover), and $150,000 for a line of credit.
Interest rates. Rates can be floating or fixed. For a term loan, the maximum floating rate is the lender’s prime lending rate plus 3%, and the maximum fixed rate is the lender’s single family residential mortgage rate plus 3%. Line of credit interest rates are limited to the lender’s prime lending rate plus 5%.
Registration fee. A 2% registration fee applies to both loan types.
Security. If you take out a term loan to buy property or equipment, the assets being financed must be offered as security. If you’re financing other expenses or opening a line of credit, the lender will take security on other business assets. Lenders also have the option to accept an unsecured personal guarantee on the loan.
The downside with the CSBFP loans is that they’re only offered by banks and credit unions, which have strict eligibility criteria. It may be difficult to get this loan with bad credit.
Yes, bad credit business loans are available in Canada. Several online lenders offer secured business loans, merchant cash advances and invoice factoring to borrowers with bad credit. You may also be able to access a loan through the Canada Small Business Financing Program.
No. While there are many lenders who offer bad credit business loans, be very wary of any lender that advertises guaranteed approval. A responsible lender will always assess your financial situation before approving your application to determine whether you can afford to repay a loan.
Yes, it is possible to get an unsecured business loan with bad credit from an online lender. However, watch out for high interest rates, and make sure the lender you're dealing with is legit before you apply.
It depends on the lender you choose and the type of loan you apply for. Some online lenders can provide funding within 24-48 hours, but in other cases it might take several business days before you can access the loan amount.
Yes. Lenders will typically review your personal credit history as well as your business credit when assessing your loan application. As a result, taking steps to improve your personal credit score can increase your chances of getting approved for a business loan.
You may be able to get a personal loan for business purposes depending on the lender you're applying with. Keep in mind that since these loans are designed for personal use, your personal credit score will be evaluated more heavily in the approval process. So you may be better off getting a small business loan if you have bad credit. Otherwise, consider bad credit personal loans.
There are some lenders that offer bad credit loans for the purchase of equipment. However, if you only need the equipment for the short-term or you're unsure if your business can afford the rates being offered, you can consider some lease options as well.
These include installment plans, where the provider purchases the equipment on your behalf and you pay it off in regularly scheduled payments. There's also finance leasing, where the lender rents the equipment to you for an agreed-upon period.
Tim Falk is a freelance writer for Finder. Over the course of his 15-year writing career, he has reported on a wide range of personal finance topics. Whether you're investing in stocks and ETFs, comparing savings accounts or choosing a credit card, Tim wants to make it easier for you to understand. When he’s not staring at his computer, you can usually find him exploring the great outdoors.
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