Money management

How to obtain a working capital loan for your business with bad credit

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Cash may be king, but what happens when a one-off emergency throws a wrench in your plans? That’s when you need quick and easy access to working capital to deal with a crisis, like a broken piece of equipment or sudden need for more supplies.

Unfortunately, when you don’t have strong personal or business credit, quickly securing a line of credit or short-term loan can be difficult and expensive. If you’re running into cash flow problems month after month, you’ll likely need to take a serious look at your business and figure out a way to right your ship. But when you’re in need of a more immediate solution to your cash woes, consider the following options and advice to get you over the hurdle—even with bad business credit in the way.

Ask for terms from your vendors.

Rather than focusing on how to raise money right away, look for a way to minimize your expenses. One option, according to Gerri Detweiler, Head of Market Education at Nav, is to ask for updated terms from your vendors. “If you have good relationships, they may be willing to let you pay net-30, net-60, or even longer terms.”

Having an extra month or two to pay your bills could free up cash to cover an immediate need. However, try not to make a habit of making last-minute payments. Paying vendors early can help alleviate bad business credit and build your score.

If your vendors don’t agree to terms, they might accept installment payments on your current balances. Again, this isn’t a long-term solution, but it could help you free up money for a one-time expense.

Consider alternate lending options.

“Some lending options don’t necessarily require a high personal or business credit score,” Detweiler says. He suggests carefully reviewing the terms, fees, and requirements, as they vary drastically for different types of funding and from one lender to the next.

Line of Credit

A line of credit is one of the most popular forms of working capital financing. These include a business credit line from a bank or an alternative lender, a business credit card, or a personal credit card or line of credit. Credit cards are a popular way to deal with everyday funding needs. However, these typically have high-interest rates, so it’s best to consider all your options to ensure that you’re making the smartest decision for your business.

Did you know?

With lines up to $250,000 and rates as low as 4.8%, Bluevine’s Business Line of Credit gives your business the flexibility of revolving credit and allows you to draw only what you need when you need it. Discover financing that grows with your business and helps your business grow.


Invoice financing lets you receive cash now for outstanding invoices. The fees for factoring can vary, and some factoring companies offer more flexible terms, including letting you choose which invoices you want to factor. Make sure you read the terms of the agreement carefully before signing on with a factoring company so that you have the full picture before you go that route.

Online business loans

Some online lenders may offer loans based on a business’s performance, rather than your credit history. The interest rate will usually be higher than what you’d receive from a traditional bank loan, but the low credit requirement and easy process make online lenders a worthwhile alternative to traditional bank loans. You also might be able to get the funds within a few days. Depending on the lender, you may be able to take out an installment loan or quickly open a line of credit and draw from it when needed.

Micro-lending services

Kelliane Parker, a SCORE business counselor in the San Francisco Bay Area, recommends looking into micro-lending services, such as Kiva Zip. Although raising the money partially depends on your ability to promote your fundraising campaign, there’s no credit score requirement, and loans through Kiva Zip have a 0% interest rate. Parker also recommends looking for local Community Development Financial Institutions Funds (CDFI Funds) that provide micro-loans based on the business’s accomplishments and owner’s experience rather than credit scores.

Merchant cash advances

Even with poor credit, business owners may be able to quickly receive a merchant cash advance, a loan that you repay with a portion of your business’s credit and debit card sales or automatic deductions from a bank account. However, high-interest rates and daily or weekly repayment requirements could drastically eat into your company’s cash flow, hindering your ability to run or grow the business. For that reason, a merchant cash advance should be one of your last resorts.

Consider borrowing from people in your network.

Asking for a loan from friends and family could seem like an easy solution. After all, they won’t likely require a credit check and will offer flexible, personalized repayment terms. The caveat is that such arrangements can also be uncomfortable or unfavorable.

Blair Koch, the CEO of a Denver, Colorado franchise of The Alternative Board (TAB) warns: “If your venture fails, now you have hurt your immediate family, plus extended family and friends. It can be very difficult to repair those relationships.”

That’s not to say it’s always a bad idea, but Kelliane Parker notes that it’s especially important to have a written agreement and a plan for paying the money back as soon as possible if you’re going to ask a friend or family member for a loan.

“Think about how much you really need,” says Parker. “You can usually only ask for money once or twice.” If you want to borrow money to take advantage of a growth opportunity or cover a one-off expense, ask yourself if the expense is necessary and make sure you’re not putting a strain on your personal relationships for unnecessary reasons.

Plan ahead to avoid trouble in the future.

Waiting until the last minute to look for funding can turn a small problem into a major disaster. By planning ahead, you can help ensure you’ll have access to working capital when you have to deal with an emergency or take advantage of a great opportunity.

Build your business’s credit score.

Regardless of your personal credit history, you may be able to establish and build your business’s credit. A business’s credit history and score are separate from the owner’s credit, and a strong business credit score could open up opportunities for vendor terms, lines of credit, and business credit cards without a personal guarantee.

Open business credit lines.

It could be easier to get approved for a business line of credit when you’re not in a tough financial spot. Plus, applying when there isn’t an immediate need lets you take your time with an application and paint a rosy (but still accurate) picture of your business.

Establish strong relationships.

According to John Meetz, President of a TAB franchise in South Central Kansas, “every small- and medium-sized business owner should establish a relationship with an accountant, attorney, and banker.” Meetz sees the importance of keeping in contact with them throughout the year, not just when you need something. “Building a relationship is key. A banker who knows you will tend to be more flexible during financial emergencies,” Meetz adds.

Create an emergency fund.

Just as many households keep a rainy-day fund and view it as an important part of their personal finances, business owners can establish an emergency business fund. Make a practice of putting a portion of your business’s profits into a separate account that you can dip into during a crisis, or when the right opportunity presents itself.
Know your business and cut expenses. Sometimes you should be working on your business rather than in it. Take an occasional step back and look for ways to improve your business’s operations, identify problems, and brainstorm solutions. “Many business owners don’t know their numbers, and that’s a critical error,” says Parker.

Bottom Line

Even with a poor personal credit history, there are several ways to raise money for your business quickly. However, it’s important to compare your options and find the one that best fits your needs. Whether you decide to move forward with a loan, factoring, or figure out a way to put off paying bills, be sure to learn from the experience and create a plan for how you’ll deal with a cash crunch in the future.


This content is for educational purposes only and should not be construed as professional advice of any type, such as financial, legal, tax, or accounting advice. This content does not necessarily state or reflect the views of Bluevine or its partners. Please consult with an expert if you need specific advice for your business. For information about Bluevine products and services, please visit the Bluevine FAQ page.

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This content is for educational purposes only and should not be construed as professional advice of any type, such as financial, legal, tax, or accounting advice. This content does not necessarily state or reflect the views of Bluevine or its partners. Please consult with an expert if you need specific advice for your business. For information about Bluevine products and services, please visit the Bluevine FAQ page.

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