Getting a business loan with bad credit might seem impossible, but in 2025, alternative lenders and digital financing platforms have made it more achievable than ever before. Whether you’re launching a startup, expanding operations, or just need extra working capital, this guide will walk you through practical ways to get funded — even if your credit score isn’t perfect.
Let’s dive into how you can get a business loan with bad credit in 2025 and grow your business successfully.
📉 What Is Considered Bad Credit in 2025?
In 2025, most lenders consider a credit score below 580 as bad. However, some fintech lenders may still accept applications with scores as low as 500, depending on your overall business health.
| Credit Score Range | Category |
|---|---|
| 750 – 900 | Excellent |
| 700 – 749 | Good |
| 650 – 699 | Fair |
| 580 – 649 | Poor |
| Below 580 | Very Poor (Bad) |
🔍 Can You Still Get a Loan with Bad Credit?
Yes! In 2025, more lenders are focusing on cash flow, revenue, and business potential rather than just your credit score.
You can qualify for a business loan through:
- Alternative lenders
- Microfinance institutions
- Peer-to-peer platforms
- Collateral-based loans
- Government-backed schemes for MSMEs
🧭 Steps to Get a Business Loan with Bad Credit in 2025
✅ 1. Know Your Credit Score and Report
Before applying, check your credit score through platforms like CIBIL, Experian, or CRIF High Mark.
➡️ Look for errors and report any incorrect information.
➡️ Improving your credit score by even 20–30 points can improve approval chances.
✅ 2. Explore Alternative Lenders
In 2025, fintech companies and NBFCs (Non-Banking Financial Companies) offer business loans to people with low credit, focusing on:
- Monthly revenue
- Business history
- Digital transactions
- GST filings and bank statements
Popular options:
- Lendingkart
- Indifi
- FlexiLoans
- Razorpay Capital
- NeoGrowth
These lenders often offer unsecured loans with fast approvals.
✅ 3. Offer Collateral or Personal Guarantee
If you’re struggling to get approval, secure your loan with assets like:
- Property
- Machinery
- Inventory
- Fixed deposits
A collateral-backed loan is less risky for lenders and may lead to lower interest rates even with a low credit score.
✅ 4. Apply for Government Schemes for Small Businesses
In 2025, the Indian government continues to support MSMEs through low-interest business loans.
Popular schemes:
- MUDRA Loan (under PMMY) – Offers up to ₹10 Lakhs for small businesses
- Stand-Up India Scheme – Supports SC/ST and women entrepreneurs
- Credit Guarantee Fund Scheme – Provides collateral-free loans to small enterprises
These schemes are less credit score-dependent and more focused on business viability.
✅ 5. Show Strong Business Financials
Even if your credit is bad, lenders may approve your application if you show:
- Steady cash flow
- Increasing monthly revenue
- Strong customer base
- GST filings and digital invoices
Tip: Attach bank statements for the last 6–12 months and income tax returns to strengthen your case.
✅ 6. Try Invoice Financing or Merchant Cash Advance
Two popular options in 2025 for businesses with bad credit:
📄 Invoice Financing:
Get an advance on your unpaid customer invoices. The lender pays you up to 80–90% of the invoice value.
💳 Merchant Cash Advance (MCA):
If you accept payments via credit/debit cards or UPI, you can get an advance based on your average daily sales. Repayment happens automatically as a percentage of daily transactions.
✅ 7. Get a Co-signer or Partner with Good Credit
Partnering with someone who has better credit history can boost your loan approval chances. The co-signer is legally responsible if you default, which lowers risk for the lender.
✅ 8. Build a Solid Business Plan
Lenders in 2025 want to see that your business has potential. A clear and professional business plan can make up for bad credit.
Include:
- Company mission & goals
- Product or service overview
- Market research
- Financial projections
- Revenue model
- Use of loan funds
🔐 Best Types of Business Loans for Bad Credit in 2025
Here are some financing options to consider:
| Loan Type | Best For | Credit Check? |
|---|---|---|
| Unsecured Business Loan | Small businesses, freelancers | Yes |
| Working Capital Loan | Managing cash flow | Minimal |
| Invoice Financing | Delayed payments from clients | No |
| MSME Government Schemes | Startups and rural businesses | Minimal |
| Equipment Financing | Buying machines or tools | Sometimes |
| Merchant Cash Advance | Retail stores with digital sales | No |
💰 Interest Rates for Bad Credit Loans in 2025
Interest rates may vary based on the lender, loan amount, and repayment capacity.
| Loan Provider | Interest Rate Range | Loan Tenure |
|---|---|---|
| Lendingkart | 15% – 27% p.a. | Up to 36 months |
| FlexiLoans | 16% – 25% p.a. | 6 to 24 months |
| Indifi | 18% – 30% p.a. | Up to 36 months |
| MUDRA Loan (Govt) | 7% – 12% p.a. | Up to 60 months |
| NeoGrowth | 18% – 28% p.a. | Based on sales |
🔄 Improve Your Chances for Future Loans
Even if you get a small loan now, use it to improve your financial profile:
- Make on-time repayments
- Reduce credit card debt
- Monitor your credit report regularly
- Switch to digital transactions
Over time, these actions will raise your credit score, allowing you to qualify for bigger and cheaper loans in the future.
📝 Final Words
Getting a business loan with bad credit in 2025 is absolutely possible. Thanks to fintech innovation, MSME schemes, and flexible financing options, entrepreneurs today have more access to capital than ever before.
Start by checking your credit score, preparing your financial documents, and researching lenders that focus on business potential, not just credit history.
Remember: Even a small loan, if managed responsibly, can be a stepping stone to bigger financial opportunities.
📌 FAQs
❓ Can I get a business loan with a 550 credit score?
Yes, some fintech lenders and government schemes accept applications with a credit score as low as 550.
❓ Do government schemes check credit scores?
Most schemes like MUDRA or CGTMSE focus more on business viability and less on personal credit scores.
❓ How fast can I get a business loan with bad credit?
With fintech lenders, you can get approval and disbursal within 2–3 days, depending on documentation.