3 Ways of Getting Bad Credit Business Loans

Small Business Loans - 3 Min Read

On today’s business landscape, having bad credit is basically the “punishment that keeps on punishing”. This is because rather than viewing them as one of many variables when assessing a business loan applicant, banks give credit scores an enormous amount of weight.

And the reason they do this is NOT because credit scores are the end all and be all of credit worthiness. It’s because demanding perfect or near-perfect credit scores (let alone good credit or satisfactory credit) is an extremely easy way for some lenders and traditional banks to mitigate risk and reject loan applications.

As such, if banks are possibly not the answer when it comes to getting bad credit business loans, where can applicants turn? Below, we highlight 3 possibilities.


Microloans are very popular these days among lenders who aim to generate above market-average returns on relatively small investments. However, the story for businesses in search of funds is somewhat different – and not as positive.

This is because competition for funds on the microloan landscape is fierce, and skeptical lenders are demanding more and more background information – such as robust, comprehensive business plans — before they’ll invest.

What’s more, businesses typically need dozens, hundreds or even thousands of lenders to invest before they reach their funding goal. Even if this happens (and the odds are against it), it can take months. For many businesses, this is simply too long of a time horizon. They need funds now – not next quarter or next year.

Purchase Order Financing

Another way of getting bad credit business loans is through purchase order financing. This is when a business essentially sells a purchase order to a lender in return for cash – usually 80 percent of the value.

When the purchase order is paid, the funds are sent directly to the lender, who keeps the agreed upon amount of principal and interest. Any funds remaining are then sent to the business.

While purchase order financing solves the problem of having to wait for funds to (possibly) materialize – which is the case with microloans – there are some risks and drawbacks as well.

Specifically, businesses can get caught in a kind of “purchase order financing spiral” where they take out one loan after another. In addition, customers may not be impressed that a business they bought something from has basically transferred their invoice to a 3rd party.

Working Capital Loans

Working capital loans are, in our opinion, by far the most business-friendly option for getting bad credit business loans. This is because:

  • Credit scores are just one of many factors that are taken into consideration – and it’s not the most important.
  • Applicants receive 100% of the loan amount – unlike purchase order financing, which typically (as noted above) only gives them 80% of the invoice value.
  • Applicants will have access to their funds within days – unlike microloans, which can take months to materialize (if at all).

What’s more, working capital loans are paid back in small, fixed amounts each day – which gives applicants more flexibility and minimizes the likelihood that they’ll need additional funds. However, if they do require a cash infusion, they can apply for a second loan while their first is still active.

Learn More

If getting a bad credit business loan from your bank is proving futile, then we invite you to contact Mulligan Funding today and learn more about our working capital business loans.

We know that credit scores are just one piece of the puzzle – and that behind many bad credit scores are smart, talented and success-oriented leaders like you who you who want, need and deserve a funding partner who believes in your success!

Call Mulligan Funding at 855-326-3564 to discuss your financing options today!

The information shared is intended to be used for informational purposes only and you should independently research and verify.

Note: Prior to January 23, 2020, Mulligan Funding operated solely as a direct lender, originating all of its own loans and Merchant Cash Advance contracts. From that date onwards, the majority of funding offered by Mulligan Funding will be by Loans originated by FinWise Bank, a Utah-chartered Bank, pursuant to a Loan Program conducted jointly by Mulligan Funding and FinWise Bank.