The FICO bands and what each one gets
"Bad credit" is a 100-point spread, and the term loan options shift dramatically across that range.
540-579
Term loan rare. $10-50K limits, 30-50% APR. Better: MCA (no FICO floor) or equipment financing if buying equipment.
580-619
Specialty lenders. $25-100K limits, 25-40% APR. Requires 12+ months + $25K+ monthly revenue.
620-659
Alternative lender market opens. $50-250K limits, 18-30% APR. Most alt-lender term loans place here.
660-699
Some banks open up. $75-300K limits, 12-22% APR. Sweet spot for access + cost balance.
700+
Full market access. Bank pricing at 7-15% APR. SBA available at 10-13% APR.
Most owners searching "business term loan bad credit" are in the 580 to 660 range. This is exactly where the broker model adds the most value. The same file can be declined by a bank, accepted at a poor rate by one alternative lender, and accepted at a materially better rate by a specialty lender if the file is shopped correctly.
What compensates for a weak FICO
1. High monthly revenue + clean bank statements
$50,000+ monthly revenue with zero NSFs in 90 days, deposit count above 5/month, average daily balance above $5,000 can move a 600 FICO file from decline to approve with reasonable terms. Underwriters know revenue is the primary repayment source; FICO is a secondary signal of personal responsibility.
2. Long time in business
36+ months in business with consistent operation offsets weak credit materially. A 590 FICO with 5 years of business history reads very differently than a 590 FICO with 9 months of history at the same revenue. The longer track record signals survival through multiple cash flow cycles.
3. Collateral (turns unsecured into secured)
A secured term loan against business savings, equipment, business real estate, or AR can sometimes approve at FICO 30 to 50 points lower than unsecured. The asset reduces the lender's loss-given-default, so they can price for lower risk on weaker credit. Trade-off: appraisal/title work adds 1-3 weeks to timeline.
4. Co-borrower or partner with stronger credit
If you have a co-owner with 700+ FICO, most lenders underwrite to the highest-FICO guarantor. This is the simplest fix when available. Both owners typically sign personal guarantees, so the partner is accepting real risk; have the conversation transparently.
What to do if your FICO is under 580
Below 580, the term loan market is mostly closed. The honest path forward:
- Merchant Cash Advance — underwrites on bank deposits, not personal FICO. Funds 500-580 FICO routinely. Trade: higher cost (factor 1.30-1.49) and daily/weekly debits.
- Equipment Financing — equipment serves as collateral, so FICO weighted less. Funds 540+ FICO. Only useful if buying equipment.
- Invoice Factoring — underwrites your customers' credit, not yours. Useful if you have B2B receivables.
- Wait and fix the FICO — 30-60 day waiting period to move from 570 to 610 FICO opens the term loan market entirely. See fixes below.
How to improve your FICO before applying
30-60 day fixes that move FICO 15-50 points
- Pay personal credit card utilization below 30% of limit. Single highest-leverage fix. Often moves FICO 15-30 points within 30 days of the new statement.
- Dispute inaccurate items on the credit report. 50% of reports have at least one error. Free disputes via the 3 bureaus. Successful removals move FICO 10-30 points.
- Bring past-due accounts current. A single missed payment can drop FICO 60-90 points. Catching up stops the bleeding.
- Avoid new credit inquiries 90 days before applying. Each hard inquiry costs 5-10 points temporarily. Stacked inquiries signal shopping distress.
- Don't close old credit cards. Counter-intuitive: closing a long-held card lowers average account age, lowers FICO. Keep them open at zero balance.
- Become an authorized user on someone else's good account. If a family member has a long clean card, becoming an AU can boost FICO 10-30 points within 30-60 days.
The honest conversation we have on weak-FICO calls
The conversation goes like this: we look at the file, identify the 1-2 fixes that would unlock the most options, and either submit now (if workable) or recommend a 30-60 day cleanup window before applying. About 30 percent of owners we talk to with sub-620 FICO are 60 days away from a materially better outcome if they fix utilization and inquiries first.
The expensive mistake is applying broadly to 5-10 lenders with a weak file, getting denied (each a hard pull), and trying again 90 days later with an even worse score. The broker model with one soft pull lets us tell you which lenders will say yes and which won't, without burning credit points in the process. See our broader bad-credit funding page for context across all 7 products.