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Some lenders specialise in providing finance to businesses with a poor credit rating, which means you can get a business loan with bad credit. Your creditworthiness isn’t the only element lenders consider but because a low credit score indicates a chequered history of repayments, it’s an important factor.
A poor credit score will limit the choice of financial products available to you but the good news is that specialist and alternative lenders also exist and can help businesses with bad credit to access the funding they need.
Various forms of alternative finance don’t rely on a good credit score and provide a vital opportunity for you to finance your business despite having bad credit. It’s important to be careful not to make too many lending applications in a short period, however, as this can worsen your credit score.
UK Business Finance can search the market on your behalf and find the best funding options for your business. We are commercial finance brokers and understand the criteria of all UK lenders.
Bad credit business loans with fixed repayment schedules are similar to ‘standard’ loans but with less favourable terms. You’re likely to only be offered higher interest rate loans as the risk to the lender is greater given your history of repayment.
You may also be restricted in terms of the amount they’re willing to lend, and the length of time to repay, as a shorter term further limits their risk exposure. You should also consider the types of borrowing that don’t require a good credit score, however, and these include invoice finance and hire purchase.
Specialist lenders offer loans to businesses with bad credit, allowing them to improve their credit score over time whilst providing vital funding. Loans may be secured on a business asset, which reduces the lender’s risk as it can be repossessed in the event of default.
Secured business loans tend to attract lower interest rates for this reason. If you opt for an unsecured loan you’ll only have access to those with a higher interest rate but on the positive side, you don’t have to put forward any collateral.
Some forms of alternative finance rely on your trading history and the strength of your sales ledger rather than your company credit score. This is highly beneficial as it enables easier access to flexible funding that supports growth and helps your business escape from bad credit.
Invoice finance
Factoring and invoice discounting are just two forms of invoice finance that support working capital availability. Briefly, you need to have a strong sales ledger to be eligible as the financier releases the majority of the value of your customer invoices soon after issue.
Hire purchase
Hire purchase is a form of asset finance that uses the asset as security for the lender. For this reason, a business’s credit rating isn’t a factor for eligibility so you can finance the purchase of expensive hard assets and avoid using your business capital.
It’s vital to make sure that you protect your credit rating from any further negative impact and build it up over time. UK Business Finance are commercial finance brokers with extensive experience in helping businesses find the borrowing they need.
We provide the support you need to access funding in this situation and scour the whole of the market to find the best deals. Please get in touch with one of the team to find out more.
We work across a wide range of sectors throughout the UK, providing specialist advice to each sector.
What are my options if I need business finance urgently?
Regardless of how closely you monitor your company’s cash flow, the nature of business means you may still need finance urgently at some point.
What is equity finance?
Equity finance is a business funding option that involves selling shares in return for investment. It’s commonly used by start-ups or early-stage company directors wishing to get their businesses off the ground and propelled towards rapid growth.
Hard asset finance v Soft asset finance
Hard asset finance and soft asset finance both offer flexible ways to purchase business assets. Whether you need a new piece of machinery to increase output or state of the art IT equipment, these types of asset finance options are invaluable in buying them affordably.
Regulated v Unregulated bridging loans – what’s the difference?
Bridging loans are finance facilities that help consumers and businesses to complete property transactions when a financial ‘gap’ needs to be bridged. Examples include a consumer purchasing a new home to live in and a business investing in commercial property.