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Even the most diligent business owner can run into a situation where they need capital to address an issue or time-sensitive opportunity. A low credit score can make finding a working capital loan a challenge. Here are some options to consider.  

More Time

Before taking on a high-interest working capital loan,  consider some immediate short-term, cost-saving options. These may allow you to free up capital now so that you can survive the short-term needs.

For example, you may consider asking vendors for a little extra time to pay or if you can pay invoices in increments (payment plan) for a specified time. Such a strategy should be thoughtfully presented to the vendor with details on how and when you will pay back the full amount.


The great thing about using factoring to bring in capital is that funds are based on money that is already owed to you in the form of open invoices. Because of this, the credit score of your customers actually matters more than your own business credit score. Factoring companies front you the working capital you need and then handle the collections for you, taking a small percentage as the factoring fee. Rates vary, and different factoring companies have different parameters for such an arrangement, so ask questions to make sure this is the right fit for you.

Merchant Cash Advance

A merchant cash advance (MCA) is linked to future sales, based on past debit and credit card transactions. An MCA can provide a lump sum of short-term working capital quickly, but you will have to immediately begin paying it back. And if your business does not end up meeting the projections established when you applied for the MCA, you will still owe based on the real amount borrowed. This form of borrowing is mostly unregulated, which can result in higher interest rates, more fees and fewer protections for the borrower. MCAs are known to be a riskier borrowing option – Find out why here.

Business Line of Credit

A business line of credit usually comes from a more traditional financial institution (like your bank) that you have an established business relationship with. A line of credit is usually in the form of a business credit card. While this type of working capital loan can be an easy or quick option, you will likely pay higher interest.

Asset-Based Loans

Sometimes if a bank expresses concern over your credit score, they may still provide a working capital loan if you have collateral assets to borrow against that will guarantee your ability to pay. Assets include things like equipment, accounts receivable or real estate. Similarly, if you need working capital to keep up payroll but also need to replace equipment, an option may be to secure the equipment using a loan or payment plan, and then using the capital to cover your other expenses.

Alternative Loans

When your credit excludes you from receiving a working capital loan from more traditional sources, you may still be eligible to borrow from an alternative lender such as an online institution. You usually receive your loan much faster this way but run the risk of paying inflated interest rates.

If you’re looking for only a small amount of capital, you might also consider a microloan. These smaller loans usually consider your company’s track record over your credit score when approving your application.

If you find that you need working capital quickly, whether to replace equipment, cover payroll, or for a temporary setback, but your credit score isn’t the best, consider these options in the context of your specific circumstances. You want to make sure that quick money options don’t lead to serious issues when trying to pay them back. This could ruin your business and damage your credit score even further.

Still have questions on how to increase your working capital with a low credit score? Reach out to RTS Financial today!

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