small business loans for women with bad credit

Top Small Business Loans for Women With Bad Credit

Ezra Cabrera | November 14, 2023


    Securing the right financing can be a game-changer for any entrepreneur, but it can be incredibly challenging for women with bad credit. Traditional lenders often have strict minimum credit score requirements, making it difficult for women with less-than-stellar credit to get approved for a business loan.

    But that doesn't mean women with bad credit can't start or grow their businesses. Several top small business loans are tailored specifically to the needs of women entrepreneurs and business owners with bad credit.

    In this guide, we'll explore various financing options to help women achieve their entrepreneurial dreams, regardless of their credit scores. We'll cover everything from government-backed loans to alternative funding options so you can find the right loan for your unique needs.

    Why is financing so important for women entrepreneurs?

    Businesswomen are a vital force in the economy, but they often face unique challenges when accessing financing. According to a recent study, financial institutions decline 22% of people who apply for business loans. Female entrepreneurs face a higher rejection rate, with 32% being turned down, while male entrepreneurs have a lower rejection rate at 19%.

    This can be a significant barrier for women entrepreneurs, making starting or growing their businesses difficult. Without access to adequate financing, women entrepreneurs may not be able to afford to purchase inventory, hire new employees, or market their products or services.

    What is a Bad Credit Score?

    A bad credit score means your credit rating is lower, indicating a higher chance of not repaying loans on time.

    The exact threshold for a bad credit score depends on the credit scoring system. The widely used FICO Score is usually below 670, and in VantageScore, it's typically below 661. These scores range from 300 to 850.

    But keep in mind that various lenders and banks might have their own standards for what they consider a bad credit score.

    The Best Small Business Loans for Women With Bad Credit

    Women entrepreneurs with bad credit still have access to various types of small business financing tailored to their needs. Here are some options to consider:

    Equipment Financing

    Equipment financing can be a valuable option for you as a business owner. It's designed to help you acquire crucial equipment and machinery for your operations.

    Here's how it works: When you identify specific equipment needs, you can approach a lender who will evaluate your creditworthiness and the equipment's value. If approved, the lender funds the equipment purchase or arranges a lease agreement.

    This financing option is especially beneficial for women entrepreneurs with bad credit since it preserves your working capital, improves cash flow, and is often more accessible due to the equipment serving as collateral. Plus, it offers potential tax benefits and ensures access to up-to-date technology tailored to your operational needs.

    Invoice Financing

    Invoice financing allows you to manage your cash flow effectively by providing funds based on your outstanding invoices.

    Here's how it works: When you have unpaid customer invoices, you can approach a lender who will assess the value of those invoices and your business's creditworthiness.

    If approved, the lender advances you a significant percentage of the invoice's value, usually around 80-90%. This upfront payment can be used to cover immediate business needs. When your customers eventually pay their invoices, the lender deducts their fees and interest, and you receive the remaining amount.

    Invoice financing is one of the best business loans for bad credit because it's based on the value of your invoices rather than your credit score. It helps you maintain a healthy cash flow, cover expenses, and seize growth opportunities while waiting for customers to settle their invoices.

    Asset-Based Loans

    Asset-based loans represent a practical financing option for business owners, especially those facing credit challenges. These loans allow you to leverage valuable assets like equipment or real estate as collateral to secure the funding you need.

    Here's how it works: When you apply for an asset-based loan, the lender assesses the value of the assets you're willing to pledge as collateral. If approved, you receive a loan based on a percentage of the asset's appraised value. Importantly, you retain ownership and use of these assets while repaying the loan. This approach significantly boosts your chances of approval, even if you have a less-than-ideal credit history.

    Additionally, asset-based loans typically come with lower interest rates and flexible use of funds, making them a valuable resource for women entrepreneurs seeking to fund their business growth and overcome credit-related hurdles.


    Microloans are small-scale loans designed for entrepreneurs and small business owners, typically ranging from a few hundred to a few thousand dollars.

    Here's how it works: They are offered by nonprofit organizations, community lenders, or government agencies, focusing on factors like your business plan and financial stability rather than just your credit score. If approved, you'll get business loans for women with manageable terms and often lower interest rates.

    Microloans are particularly beneficial for women entrepreneurs with bad credit. They provide accessible financing for equipment, inventory, or working capital, supporting business growth without excessive borrowing risk.

    Business Cash Advances

    Business cash advances provide quick funding to businesses by selling a portion of their future credit card sales as merchant cash advances. This option is particularly beneficial for companies that rely on credit card transactions.

    Here's how it works: Lenders assess the business's credit card sales history and financial health. The business receives an upfront sum if approved, typically based on a percentage of its average daily credit card sales. Repayment occurs through daily or weekly deductions from credit card transactions until the advance and fees are repaid.

    Business cash advances offer fast access to capital, making them suitable for immediate expenses or growth opportunities. Women entrepreneurs with bad credit can be accessible because approval hinges on business credit card sales rather than personal credit scores. However, be mindful of potentially higher costs and cash flow implications associated with cash advances.

    Business Line of Credit

    A business line of credit is like a flexible financial safety net for businesses. It provides access to a preset amount of money you can use when needed. Unlike a regular loan, where you get a lump sum upfront, with a business line of credit, you only borrow what you require, helping you manage cash flow ups and downs and cover various business expenses.

    Here's how it works: Think of it like having a financial cushion. Once approved, you can access funds up to a set limit. You only pay interest on the amount you borrow and can pay it back in full or in smaller installments. As you repay what you borrowed, your credit line refreshes, making it a reusable source of funds. Terms and interest rates vary depending on your lender and creditworthiness.

    A business line of credit offers significant benefits to women entrepreneurs and all small business owners. It provides financial flexibility for unexpected expenses, growth opportunities, and bridging revenue gaps. For women entrepreneurs facing unique challenges in accessing traditional financing, it's a lifeline, helping them establish and grow their businesses.

    How To Improve Your Chances of Getting a Business Loan

    Here are a few tips to increase your chances of securing financing:

    Improve Your Credit Score

    Start by reviewing your credit report for any inaccuracies or discrepancies. Pay off outstanding debts and make daily or weekly payments on time. Gradually, this will help improve your personal and business credit scores.

    Create a Strong Business Plan

    A comprehensive business plan should outline your business concept, target market, financial projections, and repayment strategy. Lenders want to see that you have a clear plan for using the loan and paying it back.

    Explore Microloans

    Microloans are often more accessible for individuals with bad credit. These loans, offered by nonprofit organizations or community lenders, provide smaller amounts of capital, making them a good starting point.

    Consider Collateral

    If you have valuable assets like equipment, real estate, or inventory, offer them as collateral. This reduces the lender's risk and may lead to loan approval, even with bad credit.

    Seek Alternative Lenders

    Online lenders and alternative financing providers are often more flexible in their lending criteria than traditional banks. They specialize in working with borrowers who have less-than-perfect credit.

    Find a Co-Signer

    If you can't get a loan on your own, consider bringing in a co-signer with strong credit. Their creditworthiness can boost your application and increase your chances of approval.

    Research Specialized Programs

    Look for programs and grants specifically designed to support women-owned businesses. These programs may have more favorable terms and lower credit requirements.

    Build a Strong Business Profile

    Focus on strengthening your business's financial health. Lenders will likely consider your application if your business demonstrates consistent monthly revenue and profitability.

    Compare Loan Options

    Thoroughly evaluate different small business loan options, paying attention to interest rates, repayment terms, and fees. Be cautious of predatory lenders and read the fine print carefully.

    Prepare for the Application

    Gather all necessary documentation before applying, including financial statements, tax returns, business licenses, and other documents the lender requests. Being organized can expedite the process.

    Demonstrate Repayment Ability

    Make a compelling case to the lender by showcasing your business's cash flow and revenue potential. Emphasize how the loan will contribute to your business's growth and profitability.

    Network and Seek Guidance

    Connect with local business organizations and women entrepreneur groups. They can provide valuable guidance, resources, and even referrals to lenders willing to work with women-owned businesses.

    Be Persistent

    Rejections can be discouraging, but don't give up! Continue exploring different lenders and financing options. Persistence often pays off, especially when you're actively working to improve your credit and business profile.

    Tips for Using the SBA 7(a) Loan Program To Finance Government Contracts

    By following these tips, you can better position your business to successfully leverage the SBA 7(a) Loan Program for financing government contracts, ensuring a smoother and more informed financing process.

    Start Planning Early

    Start your government contract financing planning early in the bidding process. This proactive approach allows you ample time to explore your financing options and select the best solution for your business's needs.

    Work With a Qualified Lender

    Collaborate with a qualified lender with expertise in SBA 7(a) loans and government contract financing. Their experience can be invaluable in navigating the complexities of these financial arrangements.

    Be Prepared to Provide Documentation

    The loan application process involves providing a substantial amount of documentation. To prevent delays, ensure you gather all the necessary paperwork in advance. This includes financial statements, tax returns, and contract-related documents.

    Understand the Terms of the Loan

    Before signing the SBA 7(a) loan agreement, thoroughly understand the terms and conditions. If you have any questions or uncertainties about the loan terms, don't hesitate to seek clarification from your lender.

    Where to Get a Loan for Women with Bad Credit

    Finding a business loan for women with bad credit may require some extra effort, but there are several options to explore:

    Online Lenders

    Online lenders specialize in offering business loans to individuals with bad credit. They have more flexible eligibility criteria than traditional banks and provide various business loans, including term loans, lines of credit, and invoice financing. While interest rates may be higher, online lenders offer quicker access to capital, which can be crucial for immediate business needs.

    Community Development Financial Institutions (CDFIs)

    CDFIs are nonprofit organizations that focus on providing financial services to underserved communities, including women-owned businesses. They often work with borrowers with poor credit and offer small business loans with reasonable terms and lower interest rates.


    Microlenders offer small loans, typically ranging from a few hundred to a few thousand dollars. They prioritize the business owner's character and the business plan's strength over credit scores, making them accessible for women entrepreneurs with bad credit.

    Government Grants and Programs

    Government grants and programs to support women-owned businesses provide non-repayable funds to help women start or grow their businesses. Researching and identifying grants aligned with your business goals can provide crucial capital without repayment obligations.

    Some of the grants you can check out are IFundWomen, Amber Grant, and Atomic Grants.

    Venture Capital and Angel Investors

    While not traditional loans, venture capital, and angel investors can provide significant funding in exchange for equity in your business. They are more interested in your business's growth potential than your credit score.

    The Bottom Line

    Women entrepreneurs with bad credit can access financing options to support their small businesses. They can secure the necessary capital by carefully considering online lenders, microloans, government grants, and alternative funding sources.

    Diligent research, a solid business plan, and collaboration with supportive organizations can pave the way for success. With determination and strategic planning, women-owned businesses can thrive despite credit challenges.

    About the Author

    Ezra Neiel Cabrera has a bachelor’s degree in Business Administration with a major in Entrepreneurial Marketing. Over the last 3 years, she has been writing business-centric articles to help small business owners grow and expand. Ezra mainly writes for SMB Compass, but you can find some of her work in All Business, Small Biz Daily, LaunchHouse, Marketing2Business, and Clutch, among others. When she’s not writing, you’ll find her in bed eating cookies and binge-watching Netflix.