Bank of America requires a 700 personal FICO score for a business loan and Wells Fargo sets its floor at 680, according to Bankrate’s 2026 requirements guide. Fora Financial writes at 570. Credibly approves at 500. Invoice factoring has no minimum credit score at all, because the invoice is the collateral. Those numbers describe the same market on the same day, which tells you that “bad credit” isn’t one closed door but a question of which products you’re knocking on. So which ones are worth reaching for, and which ones cost more than the problem they solve?
Getting declined by a bank isn’t the expensive mistake. Taking the first offer that says yes is, and the gap between the cheapest capital available to a 580-score borrower and the most expensive is roughly the difference between 9 percent and 200 percent a year for the same money. Here’s how the tiers actually work, what each product really costs once you convert it properly, and the order you should apply in.
Your score decides which products you can reach, not whether you can borrow at all
Lenders sort roughly into bands. Above 680 you have conventional bank loans, SBA 7(a) and 504, and the best line-of-credit pricing. Between 620 and 679 you’re looking at SBA microloans, some online term loans and lines of credit. From 575 to 619, equipment financing and most microlenders remain open. Below 575 you’re into revenue-based financing, merchant cash advances and invoice factoring, several of which approve at 500 and one of which doesn’t check your score at all.
Personal and business credit are separate files, and plenty of owners have a damaged personal FICO alongside a healthy Dun & Bradstreet PAYDEX or Experian Business score. Lenders who evaluate both will approve borrowers who look unqualified on personal credit alone. The reason personal credit gets checked in the first place is that almost every small business loan carries a personal guarantee, meaning you’re personally on the hook if the business can’t pay, so the lender is underwriting your history as much as your company’s.
One rule change this year genuinely helps borrowers on the wrong side of 680. Under SBA Procedural Notice 5000-875701, effective March 1, 2026, the SBA stopped requiring lenders to run 7(a) small loans through the FICO SBSS pre-screen, which had carried a hard floor of 165. Lenders can now use whatever credit model they choose, which means a file with a 640 personal score and strong debt service coverage no longer gets rejected by an algorithm before a human reads it. Lender selection matters more than ever as a result, because some banks kept their conservative internal scoring anyway.
The SBA microloan is the cheapest money most bad-credit borrowers can actually get
SBA microloans run up to $50,000, and the SBA reports the average is about $13,000. Interest typically lands between 8 and 13 percent with terms up to seven years, which is a different universe from anything else on this page. The SBA doesn’t issue them directly. It funds nonprofit intermediary lenders, most of them community development financial institutions, and as of October 2025 there were 158 active intermediaries covering all 50 states, Washington D.C. and Puerto Rico.
Here’s the part borrowers miss. The SBA doesn’t set the credit standards for this program, so each intermediary writes its own. Many work with scores around 575, some go lower where the business plan and cash flow compensate, and a decline from one intermediary tells you nothing about the next one down the road. Apply to several. Unlike 7(a) and 504, startups qualify, and many intermediaries fund businesses under a year old.
The constraints are real. Microloan proceeds can’t be used to pay existing debt or buy real estate, collateral and a personal guarantee are usually required, and the timeline from application to funded cash typically runs 30 to 60 days rather than 24 hours. Many intermediaries also bundle free mentoring and technical assistance with the loan, which for a first-time borrower is often worth as much as the capital. You find them through the SBA’s microlender directory or its Lender Match tool.
CDFIs read your business before they read your score
Community development financial institutions are mission-driven lenders, a mix of nonprofits, credit unions and community loan funds, certified by the Treasury to serve underserved markets. They underwrite differently from banks, weighting character, industry experience and the viability of what you’re actually building alongside the credit report. Many write loans as small as $500, and their pricing tends to sit near SBA levels rather than fintech levels.
Kiva sits at the far end of this world and is worth knowing about even if you never use it. Its US program lends up to $15,000 at zero interest with no fees and no minimum credit score, funded by crowdlending. You spend 15 days inviting friends and family to back you, then the campaign opens to Kiva’s wider network of lenders. The catch is the ceiling and the timeline, so it suits low startup-cost businesses rather than anyone needing working capital this month.
A 1.30 factor rate is not a 30 percent rate, and that gap is where businesses die
Merchant cash advances approve at 500 and fund in a day, which is why they dominate the search results for bad credit business funding. They’re not priced in interest. An MCA quotes a factor rate, a fixed multiplier applied to the advance, so $50,000 at a 1.30 factor means $65,000 in total payback. Typical factor rates run from 1.1 to 1.5, with 1.2 to 1.3 common for established businesses with solid deposits.
Convert it and the picture changes completely. The math is the factor minus one, times 365, divided by the number of days you’ll repay over. That same 1.30 factor repaid across 180 days works out to roughly 61 percent APR. Repaid in 90 days, it’s about 122 percent. Effective MCA APRs commonly land between 40 percent and well over 300 percent, and in most states nobody is required to tell you that before you sign, because an MCA is legally structured as the purchase of future receivables rather than a loan and therefore sits outside the Truth in Lending Act.
Three structural features make this worse than the headline number suggests. Paying early saves you nothing, since the fee is fixed at signing, and repaying faster actually raises your effective APR. Repayment comes out as daily or weekly ACH debits from your operating account rather than a monthly payment you can plan around. And the provider files a UCC-1 lien that other lenders can see, which frequently blocks you from cheaper financing while it’s active. Broker commissions of 8 to 12 percent are typically baked straight into the factor rate you’re quoted, so going direct to a funder where possible cuts real money off the total.
A growing list of states now forces the funder to show you the real number
California moved first with SB 1235, the country’s original commercial financing disclosure law, and tightened it considerably with SB 362, which took effect January 1, 2026. Providers can no longer use “interest” or “rate” in ways likely to deceive, and any time they state a charge, pricing metric or financing amount after making a specific offer, the APR has to appear alongside it. In practice that’s a ban on marketing a deal as “1.45 factor, 12-month term” without the annualized figure next to it.
New York’s Commercial Financing Disclosure Law requires the financing amount, the finance charge, the APR or estimated APR, the total repayment amount, the payment schedule and the prepayment policy, on offers up to $2.5 million. New York also restricted confessions of judgment against out-of-state borrowers back in 2019, closing a mechanism funders had used to obtain judgments without a real lawsuit. Its FAIR Business Practices Act, effective February 17, 2026, extended unfair and abusive practice protections to small businesses directly. Virginia, Utah and Connecticut have their own disclosure and registration regimes, and Texas HB 700 took effect in September 2025 with providers and brokers required to register with the Office of Consumer Credit Commissioner by December 31, 2026.
Somewhere between 35 and 40 states still have no MCA-specific legislation at all, and in those places advances are treated as ordinary commercial contracts. No APR disclosure is required, confession of judgment clauses may be fully enforceable, and stacking multiple advances at once isn’t prohibited. If you’re in one of those states, run the conversion yourself before signing, and treat a funder who won’t give you a total repayment figure in writing as a decline rather than an offer.
Apply in cost order, not speed order
Start with a CDFI or SBA microloan intermediary, then whichever bank or credit union already holds your business accounts, since an existing relationship opens doors that a cold application won’t. From there work through online term loans and lines of credit, then equipment financing and invoice factoring, both of which are self-collateralizing and care less about your score than about the asset or the invoice. Revenue-based financing and merchant cash advances belong at the bottom of the list, not the top, however loudly the ads suggest otherwise.
Before you apply anywhere, clean up the thing these lenders actually read. Revenue-based and MCA underwriters weigh deposit consistency, average daily balance and NSF or overdraft frequency far more heavily than your FICO, so a few months of no negative-balance days can move your offer more than a credit repair effort would. Use soft-pull prequalification while you’re shopping so comparison doesn’t cost you hard inquiries, and start building business credit separately through your D&B and Experian Business files, because that’s the thing that gets you out of this tier permanently.
One exit route that used to exist has closed. As of the 2026 SBA rule changes, merchant cash advances can no longer be refinanced with an SBA loan, which was for years the standard way businesses climbed out of an expensive advance into cheap government-backed debt. That makes the decision at the front end permanent in a way it wasn’t before.
None of this makes borrowing at 550 cheap, and anyone advertising a bad-credit business loan at bank pricing is selling lead generation rather than capital. What the numbers do show is that the spread between the best and worst option available to the same borrower on the same day is enormous, which means the thirty days you spend applying to three microlenders before you touch an advance is usually the most profitable month of work in the whole exercise.
