Best Small Business Loans for Low Credit Scores

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How to Qualify for Small Business Loans: 2025 Guide for Entrepreneurs

Are you a small business owner looking for funding to grow your business? Getting approved for small business loans can help you move forward, whether you’re just starting or trying to expand. In this updated 2025 guide, we’ll break down the loan process in simple steps, explain your best options, and show you how to qualify—even if banks have turned you down.

At Gustan Cho Associates, we understand that every business has a unique story. That’s why we help small business owners nationwide get the funding they need, even when others say no.

Why Small Business Loans Matter in 2025

Small businesses make up more than 60% of the U.S. workforce. They’re the heart of the local economy and a big part of what keeps communities alive. But running a business takes money—for inventory, equipment, payroll, or just staying afloat during slow seasons.

Small business loans are important for helping owners reach their goals. These loans offer financial support for starting a business, buying equipment, or expanding operations. They cover daily expenses and can help you hire new staff for growth. If you want to take your business to the next level or need help recovering from challenges, small business loans can give you the push you need to succeed.

What Are Small Business Loans?

Small business loans are financial resources given by lenders to entrepreneurs who require capital. They may be short-term or long-term and are made available by banks, credit unions, private lenders, or government-backed programs such as the SBA.

Types of small business loans in 2025 include:

• Term Loans – Lump sum with fixed payments over time.
• Lines of Credit – Flexible borrowing, like a credit card for your business.
• SBA Loans – Government-backed loans with lower rates and longer terms.
• Equipment Financing – For buying tools, trucks, or machines.
• Invoice Financing – Get cash for unpaid customer invoices.

Every loan has different rules, interest rates, and repayment terms. Let’s walk through how to qualify and choose the right one.

Top Small Business Loan Options in 2025

1. SBA Loans

SBA loans are backed by the U.S. government, which means they have lower interest rates and longer repayment periods for borrowers. The most popular types are SBA 7(a), SBA Express, and CDC/504 loans, with interest rates usually between 7% and 10%. These loans are great for business owners with good credit and a solid business plan.

2. Business Lines of Credit

A business line of credit lets you borrow what you need, when you need it. You only pay interest on what you use, with rates from 10% to 30%. It’s useful for seasonal businesses or those facing cash flow issues since it provides quick access to funds without the hassle of a regular loan.

3. Short-Term Loans

Short-term loans provide quick funding that you can repay in 3 to 18 months. The interest rates range from 8% to 20%. These loans are ideal for emergencies, buying inventory, or taking advantage of time-sensitive chances.

4. Equipment Loans

Equipment loans help businesses secure costly items like vehicles and machinery without draining cash reserves, benefiting industries like construction, transportation, and manufacturing by enabling essential tools for operations while fostering growth.

5. Invoice Financing

Invoice financing helps small businesses quickly obtain cash for unpaid invoices. Instead of traditional interest rates, monthly fees range from 1% to 5%. This option benefits businesses dealing with other businesses that often experience payment delays, improving cash flow and ensuring smooth operations without waiting for payments.

How to Qualify for Small Business Loans

Getting approved starts with knowing what lenders look for. Here are the most important things they’ll check:

1. Credit Score

Your personal and business credit scores are important when seeking small business loans. Lenders typically examine your personal credit, making it essential to maintain a strong score. For traditional loans, a score of at least 650 is recommended. However, some alternative lenders may approve scores as low as 500, giving chances to businesses with complex credit histories.

2. Time in Business

Lenders generally prefer companies that have been operating for 6 months to 2 years because it shows stability. However, startups can still get funding by providing collateral or applying for programs for new businesses.

3. Revenue

Lenders usually want to see a steady minimum revenue, like around $10,000 a month, to make sure you can handle repayments. But if your income is all over the place, regular loans might not be the best fit. In those cases, options like bank statement loans or lines of credit can be more flexible and work better with your varying earnings.

4. Business Plan

You need a clear and simple business plan to apply for SBA or startup loans. Start by explaining what you sell. Next, describe how you will use the loan money. Finally, share how you plan to pay back the loan. A well-organized plan shows lenders that you are ready and responsible.

5. Collateral (for some loans)

When you’re looking to get small business loans, using collateral helps. Equipment or vehicles can back up your loan, making it easier to get the money and lowering the lender’s risk. While some small business loans are unsecured and don’t need any collateral, they usually come with higher interest rates because they’re riskier for the lender. Business owners need to get a good grip on the differences between collateral and unsecured loans to make better financing decisions.

How to Apply for Small Business Loans

Here’s a step-by-step look at the application process:

1. Know How Much You Need
   • Are you covering payroll? Buying equipment? Opening a second location?
2. Pick the Right Loan Type
   • Term loan for long-term growth
   • Line of credit for everyday expenses
   • SBA loan for lower rates
3. Check Your Credit
   • Pull both your personal and business credit reports
4. Gather Your Documents
   • Tax returns, bank statements, profit & loss statements, business plan
5. Apply With a Lender That Fits You
   • Gustan Cho Associates can match you with lenders who understand small business challenges

Tips to Boost Your Approval Odds

Want to improve your chances of getting small business loans? Try these:

• Improve your personal credit score
• Separate business and personal finances
• Show steady cash flow in your bank statements
• Keep your debt-to-income (DTI) ratio low
• Have a clear use for the funds

Can You Get a Business Loan if Your Credit is Bad?

Yes. While some lenders need good credit, others—especially non-bank and private lenders—work with as low as 500 credit scores.

At Gustan Cho Associates, we specialize in helping business owners who have been turned down elsewhere. We look at the whole story, not just your credit score.

Why Choose Gustan Cho Associates for Small Business Loans?

Many lenders have strict rules or overlays that make it hard to get approved. At Gustan Cho Associates:

• We work with over 210 private and alternative lenders
• We have no lender overlays on many programs
• We can offer fast approvals and flexible requirements

If your bank says no, we may say YES.

Get the Small Business Loan You Deserve

Don’t let tight bank rules or low credit hold you back. Small business loans are available in 2025 to help you grow, hire, and thrive. Whether you need working capital, equipment, or breathing room, we can help.

Contact Gustan Cho Associates today to get pre-approved, explore your best loan options, and get funded fast. Contact us at 800-900-8569, text us for a faster response, or email us at alex@gustancho.com. The team at Gustan Cho Associates is available 7 days a week, on evenings, weekends, and holidays.

Frequently Asked Questions About Small Business Loans:

Q: What are Small Business Loans Used for?

A: Small business loans help business owners pay for equipment, payroll, inventory, or to grow their company. You can also use them to get through slow seasons.

Q: Can I Get Small Business Loans if I have Just Started?

A: Yes. Some lenders offer small business loans to new businesses, especially if you have a good plan or offer collateral like equipment.

Q: What Credit Score do I Need to Get Small Business Loans?

A: Most lenders want at least a 650 credit score, but some may approve you with a score as low as 500.

Q: How Much Money Can I Borrow with Small Business Loans?

A: Loan amounts vary depending on your revenue and credit. Some small business loans go from $5,000 to over $5 million.

Q: What Types of Small Business Loans are Available in 2025?

A: Popular options include SBA loans, term loans, business lines of credit, equipment loans, and invoice financing.

Q: How Fast Can I Get Approved for Small Business Loans?

A: Some lenders approve loans in just 1–2 days. SBA loans can take a few weeks. Gustan Cho Associates offers fast approvals with flexible rules.

Q: Do I Need a Business Plan to Get Small Business Loans?

A: Yes, especially for SBA loans or if your business is new. A simple plan that explains what you do and how you’ll repay the loan can help a lot.

Q: Do Small Business Loans Require Collateral?

A: Not always. Some small business loans are unsecured, but loans with collateral often have lower interest rates.

Q: Can I Get Small Business Loans with Bad Credit?

A: Yes. Gustan Cho Associates works with lenders who approve small business loans for owners with credit scores as low as 500.

Q: Why Choose Gustan Cho Associates for Small Business Loans?

A: We work with over 210 lenders and have no extra rules or overlays. Even if a bank says no, we may say yes and help you get approved fast.

This blog about “Best Small Business Loans for Low Credit Scores” was updated on May 20th, 2025.