Can I get a business loan with bad credit?

Having a poor credit history can often hinder business finance applications, especially through the more traditional routes. If you believe your credit file is working against you it can be a frustrating time, especially if you're looking to push forward your business but have nowhere to turn.

If you need business debt advice, visit the Business Debtline.

Is it possible to get business finance with bad credit?

It very much depends on your circumstances and willingness to use differing forms of security, but it is possible to get a business loan with a bad credit history. It’s always worth speaking to a specialist about sourcing finance, especially if your credit file is poor.

Often, businesses that experience financial difficulties would look to take up a finance solution, more often than not, by visiting their bank. However, due to various reasons, the bank is no longer an option for many small firms, let alone business owners with poor credit histories. Because of this, we're starting to see more and more lenders who provide alternative methods of lending.

It's important to remember that with the boom of alternative lending platforms in recent years, more and more lenders provide finance options for businesses with bad credit — meaning the issue is becoming less and less relevant to finance applications.

Alongside this, there are various grants and government initiatives to help businesses grow and survive – after all, making a business work rather than stop trading is a benefit to the UK economy in the long run, so help and advice is regularly available.

What does it mean for my business?

Whether you have a chequered history or have recently found yourself surrounded by financial troubles, there are solutions set up to provide support for various circumstances. As mainstream lenders tend to see things very much in black and white, we like to listen to your story – ensuring you not only get the chance to speak to lenders, but when you do you get the best match possible.

Here’s what to look out for. If you recognise that your business is in a similar position, don’t be put off searching for finance – there may still be a solution for you:

Business CCJs

Lenders take into account how many you have, their value and the frequency at which you have received them.

Winding orders

If you have been subject to this order in the past (even if it has been rejected) this could affect your finance applications.

Visible financial performance

When performing checks on your company, lenders often take a look at public data about your company. Even if you don’t believe the information is correct, some of the more traditional lenders will make assumptions based on your net worth and whether or not you hold a healthy amount of cash in your business.

Directors' history

If there are failed or underperforming businesses with common directorship, this could influence the way lenders perceive your business – even if it performing well.

People behind the business

If people involved with the business have a personal history of IVAs, debt management plans or anything similar, it could prove to be difficult to source finance.

So how does it work?

As lenders require some kind of security to provide finance to businesses, we're seeing more creative methods of finding it. This can be done in a number of ways, and lender terms differ on a deal-by-deal basis. Overall, companies are getting more tailored solutions, which is a great sign of a flourishing industry that really wants to lend to small businesses.

For example, instead of looking at company Directors, certain lenders are willing to take into account a healthy turnover as a sign of a viable business, or some providers will use guarantees, or assets to secure funding. There are numerous possibilities.

What’s available to me?

Because these lenders provide tailored business loans, more businesses are now able to access finance solutions by using different forms of security.

Turnover Loan

If you have a strong credit score and a business operating at a healthy turnover, even with a history of past issues you could still be eligible for a loan based on your business’s turnover.

Capital On Tap business credit card

Capital On Tap’s business credit card is designed for a wide range of firms, even those that don’t have perfect credit. If you’re not ready for other kinds of borrowing yet, you may still be eligible for a business credit card with Capital On Tap.

They only run a soft credit check, which won't leave a footprint on your credit history, so you can check your eligibility without affecting your credit score.

Check eligibility

Asset Finance

For businesses that are asset-rich and cash-poor, there's a high probability that lenders are willing to take equipment, vehicles, or commercial property as security. This guarantees them a lower-risk investment, as they're more focused on the security available than anything else.

Invoice Finance

Usually in the form of factoring, some lenders will look past credit history and financial issues if the business being operated is functioning well and has debt owed to it in the form of invoices. With many variables, it's worth speaking to a specialist about invoice finance. If your business is suitable, it could be a useful solution that not only serves as an alternative way of sourcing finance, but helps you secure a more efficient income by fast-tracking invoice payments.

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