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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.
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 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.
Can I get a business loan with bad credit?
Some lenders specialise in providing finance to businesses with a poor credit rating, which means you can get a business loan with bad credit.
How long does it take to get finance for a business?
Business loans from high street banks have been notoriously slow to access. This has left businesses in dire need of quick funding without the capability to boost cash flow or implement growth plans.
Can I lower the interest rate on my business loan?
With fluctuating interest rates and ever-increasing strain on business finances, you might be wondering if you can lower the interest rate on your business loan.
Understanding your small business finance options
Gone are the days when the high street banks were the only option for financing a small business.