Securing funding is essential to achieve business goals, especially for start-ups and small businesses. However, getting financing can be challenging for businesses with bad credit. Having bad credit means you’ve been late on payments or not paying them at all – amongst other factors.
To keep your credit score in good shape, you need to pay your repayments on time, keep your credit usage low, regularly check your credit report for mistakes, and be financially responsible.
Although getting a bad credit business loan in Canada is possible, it comes with risks; you’ll need to consider higher interest rates and shorter repayment terms.
In this article, we will provide insights into bad-credit business funding in Canada. We’ll also recommend six credible lenders that help fund businesses with poor credit scores.
While we can offer guidance and advice on which lenders to approach, it is ultimately up to you to take the necessary steps to improve your credit score and borrow responsibly.
How to get a bad credit business loan
If you want a better chance of getting approved for a bad credit business loan in Canada, here are some proactive steps you can take:
1. Update your business plan
Many lenders require a business plan, especially for new businesses. Reviewing and updating your plan can clearly show lenders key details about your business model, product value, and revenue growth expectations. To optimize your business plan for low credit score loans, it should clearly explain your business model, your financial projections and your target market. It should also show that you understand your industry and can run a successful business.
2. Improve your credit score
You have a better chance of getting approved for a loan with lower interest rates when your credit score is high. You can do several things to improve your credit score, such as fulfilling your bills on time, keeping your credit usage low, and disputing any errors on your credit report.
3. Choose the right lender
Different lenders have varying credit requirements and risk levels. Traditional banks offer low-interest rates but have strict lending criteria, while online lenders have lower FICO score requirements but higher interest rates. Keep this in mind: the most suitable loan option for your small business depends on your specific need at the time, so do your research and choose what's best for you.
4. Consider a co-signer
Having a cosigner with good credit can help you get approved for a loan. Since they agree to take responsibility for the loan if you default, the lender will have more confidence that you will repay it.
5. Offer collateral
Offering collateral to the lender will improve your chances of getting approved for bad credit business loans. Collateral is an asset that the lender can seize if you default on the loan. Common forms of collateral for business loans include real estate, equipment, and inventory.
Where to find small business loans for poor credit in Canada
1. 2M7 Financial Solutions
2M7 Financial Solutions is a Canadian-based alternative lender that provides short-term business loans to small and medium-sized businesses. The finance company has a high approval rating of 97%, making it a good option for businesses needing quick loans for bad credit.
Their loan products include merchant cash advances, equipment financing, and unsecured business loans. They offer same-day funding and repayment terms of up to 18 months. The loan amount you can receive will depend on different factors, but it can be anywhere from $10,000 to $250,000.
2. Merchant Growth
Merchant Growth is another great option for small and medium-sized businesses with bad credit scores. Merchant Growth offers business loans ranging from $5,000 to $800,000 and interest rates varying from 12.99% to 39.99%.
One advantage of Merchant Growth loans is that approved businesses can get their funds in as little as 24 hours. To be eligible for a loan from Merchant Growth, your business should be located in Canada, have been running for at least six months, and achieve a minimum of $10,000 in monthly sales.
3. Spring Financial
Spring Financial offers a variety of loan products to small businesses, including unsecured business loans, merchant cash advances, and equipment financing. They have a minimum credit score requirement of 550, making them a good option for businesses with bad credit. They offer loans up to $35,000 with interest rates ranging from 9.99% to 46.99%. The interest rate you are offered will depend on various factors, including the amount you require and your credit score.
4. Greenbox Capital
Greenbox Capital is another reliable alternative lender for small and medium-sized businesses with bad credit scores. This finance company offers a variety of loan products, including merchant cash advances, short-term loans, lines of credit, and invoice factoring.
Greenbox Capital aims to offer fast and flexible funding to businesses that may have difficulty obtaining financing from traditional banks. It provides funding from as low as $3,000 up to $500,000. To qualify for their bad credit business loan, you must have been in business for at least 5 months and have average monthly sales of at least.
5. Lending Mate
Lending Mate offers a variety of loan products to small businesses in Ontario and British Columbia. They offer loans up to $10,000, but with a high-interest rate of 43% per annum. Lending Mate considers business with bad credit and does not require early settlement fees or charges for making extra payments.
6. United Capital Source
United Capital Source is a lender that understands that no two businesses are the same and that a poor credit score is not always an indicator of irresponsibility. As a result, they offer loans to businesses with bad credit as long as they meet specific criteria.
United Capital Source offers loans from $1,000 up to $10,000,000. The interest rate for these loans varies depending on the borrower's credit score and the loan amount. United Capital Source may be a good option if you are a small business owner with bad credit, as they offer competitive interest rates and a variety of loan products to explore.
Can you get a business loan with bad credit?
Getting business funding with a bad credit score is possible, but it may be more difficult. Alternative lenders, such as online lenders, are great options for small business loans for bad credit but usually have high-interest rates and fees.
How fast can I get a loan for bad credit?
The speed at which you can get bad credit business loans varies depending on the lender and the type of loan. Some lenders may be able to provide funding within a few days, while others may take several weeks.
What can I do if my business has bad credit?
Here are some things you can do if your business has bad credit:
- Pay your bills on time. Lenders want to see that you're responsible with your money.
- Keep your credit usage below 30%.
- Check your credit reports regularly. If you see any errors, dispute them immediately.
- Use your credit responsibly and build a good credit history by making on-time payments.
- Show strong annual revenue. It will make lenders more likely to approve you for a loan, despite having bad credit.
What is the easiest loan to get?
With good credit and a strong financial track record, traditional bank loans may be the easiest to obtain. However, for businesses with poor credit or limited financial history, alternative lenders (like we’ve listed above) may provide easier access to funding but at higher interest rates and fees.
Can I get a start-up business loan with bad credit?
Getting a start-up business loan with bad credit may be more difficult, as most lenders view start-ups as high risk. However, some alternative lenders specialize in funding start-ups, but few will be willing to work with businesses with bad credit.
The bottom line: loans for bad credit
Getting a business loan may be more challenging if you have bad credit, but it is not impossible. Several lenders offer loans to businesses with bad credit, but they typically come with higher interest rates and fees. Ensure to compare rates and terms from multiple lenders before you choose one.
You can increase your chances of getting approved for business loans for poor credit by proactively improving your credit score, such as paying bills on time, checking credit reports regularly and keeping credit usage low.
It is also important to remember that getting a bad credit business loan is a short-term solution. The best way to improve your long-term financial health is to improve your credit score. This will make it easier for you to get loans in the future at lower interest rates
Explore our guide for different funding options once you’ve improved your credit score. Remember, responsible credit management is key to securing financial support and ensuring the success of your business in Canada.