Secured Business Loans for Bad Credit: Using Collateral to Qualify

Secured business loans allow business owners with bad credit (FICO scores below 600) to obtain funding by pledging assets like equipment, real estate, or invoices as collateral. By shifting the lender's risk from your credit history to the value of the asset, you can unlock higher loan amounts and lower interest rates than unsecured options provide. These loans typically offer funding up to 80-100% of the asset's value even with a history of late payments or collections.

Last updated June 8, 2026

This funding path is designed for established business owners who have hit a 'credit ceiling' due to past financial challenges, such as late payments, high credit utilization, or medical debt. If your business has the physical tools or real estate to back up its promises, these lenders will look past your credit report to find the value in your balance sheet.

It is also ideal for growing companies that need significant capital for expansion but don't yet meet the strict FICO requirements of the SBA or traditional banks. By leveraging specific assets like specialized equipment or unpaid invoices, you can skip the 'no' from local banks and secure the liquidity needed to reach the next level of profitability.

Requirement	Typical standard
FICO Score Requirements	500+ (Lower possible with high-value collateral) house
Time in Business	6 Months minimum (Startups okay with 20% down)
Monthly Revenue	$10,000+ for most asset-backed lines
Collateral Coverage	Asset value must typically be 1.2x the loan amount
Direct Ownership	Must own at least 50% of the asset being pledged
Industry Restrictions	Most industries eligible; cannabis and adult restricted

When this makes sense

• You have a FICO score below 620 but own valuable machinery or property.
• You need a larger loan amount than unsecured 'high-risk' lenders will offer.
• You want to lower your monthly payments by extending the loan term.
• You are a B2B business with high-quality invoices but slow-paying customers.

When to be careful

• The asset you are pledging is critical to daily operations (risk of seizure).
• The 'soft costs' of the loan (appraisals, legal fees) outweigh the interest savings.
• You are unsure if your revenue can sustain the new debt service.
• The lender requires a 'blanket lien' on all business assets for a small loan amount.

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