How To Secure A Business Loan Without A Strong Credit Score

A low credit score might seem like a major obstacle to securing a business loan—but it doesn’t have to be. In 2025, there are smarter, more inclusive financing options available that consider more than just your credit history. Whether you’re a startup or a growing small business, the right strategy can open doors to funding.

1. Explore Government-Backed Loan Schemes

The Indian government offers several loan schemes that are designed to support small businesses, especially those lacking a strong credit profile.

1. MUDRA Loans (under PMMY): Provides loans up to ₹10 lakh for micro and small enterprises.

2. CGTMSE (Credit Guarantee Fund Trust for Micro and Small Enterprises): Offers collateral-free loans backed by a partial credit guarantee.

3. Stand-Up India Scheme: Tailored for SC/ST entrepreneurs and women business owners, with easier access to funding and minimal collateral requirements.

These schemes prioritize business potential and inclusivity over credit history.

2. Work with Flexible Lenders

Private lenders and Non-Banking Financial Companies (NBFCs) often have more relaxed credit requirements than traditional banks. Instead of focusing solely on your credit score, they evaluate:

1. Business bank statements

2. Revenue trends

3. GST returns

4. Future growth potential

Recommended NBFCs include: Lendingkart, Kinara Capital, and NeoGrowth.
These lenders use alternative data models to assess your business health, making them more accessible to entrepreneurs with low credit scores.

3. Demonstrate Business Stability

Lenders want to see that your business is financially stable. Even with a low credit score, showing consistent performance can significantly boost your chances of loan approval. Be prepared to submit:

1. At least 6 to 12 months of bank statements

2. Proof of steady income through invoices or contracts

3. Financial statements reflecting revenue growth

If your operations are stable and reliable, many lenders are willing to overlook credit limitations.

4. Add a Guarantor or Co-Applicant

Bringing in a co-applicant or guarantor with a stronger credit profile can improve your loan eligibility. This added assurance reduces the risk for the lender and strengthens your application.

5. Provide Alternative Collateral

If you’re unable to secure a loan due to credit concerns, offering valuable assets as collateral can make a big difference. Acceptable forms of collateral may include:

1. Gold

2. Fixed deposits

3. Business inventory

4. Equipment or machinery

By offering security, you increase the lender’s confidence in your ability to repay.