Bad Credit Business Loans

How to get a business loan with bad credit

By Elma Glasgow

A business with a bad credit score will often struggle to secure funding from a traditional lender, such as a bank. Lending money to a company with a history of late credit card payments, non-payment of loans or county court judgements (CCJs) is generally regarded as too much of a risk. And that's irrespective of how well the business might be performing now, or its potential for future growth.

However, a bad credit score shouldn't always get in the way of a successful funding application. Thanks to the growing alternative finance (altfi) sector, there are now a number of other routes available to SMEs that are seeking an injection of capital.

Bad credit business loans

Small businesses with a bad credit score no longer need to rely on borrowing from friends and family, or credit cards, which are historically the other go-to sources for extra cash. Indeed, altfi providers often give small businesses funding despite poor credit scores. Since these lenders are set up to cater for the needs of SMEs, they’re generally more flexible in assessing a business’s suitability for a loan. Therefore, a non-existent or bad credit score doesn’t have to mean the end of your funding search.

How do alternative finance providers assess loan applications?

What altfi providers assess when deciding whether to lend money varies from lender to lender. This is why research is essential.

Fleximize takes a more flexible approach to small business lending by looking beyond bad credit scores and trying to find a way to say 'yes' to every application. However, it’s important to understand that both your business and personal scores are assessed. So, if you have a poor personal score, but a good business score – or vice versa – you could still be approved for borrowing.

Other deciding factors that Fleximize looks at include whether you can provide a personal guarantee. The company will also ask itself the following questions about your business:

Is there good and sustained business growth?
Has the customer improved on their former negative track record in repaying debt?
Is their personal credit score better than their business credit score? Or vice versa?

Furthermore, if your business has directors, then each of their credit scores will be assessed too. While it’s up to each lender to decide how much bad credit they’ll accept, directors' credit records are considered as part of the bigger picture, so it’s important that they're all aware of this.

Although altfi lenders are more likely to lend to SMEs, they’re still very vigilant in terms of who they approve for funding. If a lender takes on a customer with a bad credit score, then it’s likely the interest rate will be higher than on a loan to an applicant with a better score.

How to check your credit score

If you want to check the credit score of your small business, Experian provides a business credit report service. For personal credit score reports, try Credit Karma and Clear Score.

Ask Fleximize

Trying to get a business loan with bad credit can be daunting. Not only will Fleximize listen to your concerns, but it also has the experience to help you find the right funding solution for your own situation. So give us a call on 0207 100 0110, get a quick quote or apply online now.