It very much depends on your circumstances and willingness to use different forms of security. 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.
Traditionally, businesses that experience financial difficulties visit 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. This is where alternative methods of lending come to play.
It is 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.
What does it mean for my business? Mainstream lenders tend to see things in black and white, as opposed to listening to your story. If you recognise that your business is in a similar position, don’t be put off searching for finance.
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.
Directors' history If there are failed or underperforming businesses with common directorship, this could influence the way lenders perceive your business.
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.
How does it work? As lenders require security to provide finance to businesses, we're seeing more creative methods of finding it. This can be done in a number of ways. 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.
What is 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, you could still be eligible for a loan based on your business’s turnover.
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.
Invoice Finance 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. 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.