Can I Get a Business Loan with Bad Credit

Having a poor credit history can make it harder to get approved for finance, but it does not automatically mean you cannot get a business loan. In fact, many lenders in the UK now offer funding options specifically designed for business owners with bad credit.

Whether you are just starting out or looking to grow an existing company, it is still possible to secure a business loan, even if your credit score is low. The key is to understand how lenders assess risk, what types of loans are available, and how you can improve your chances of being approved.

What is considered bad credit?

Bad credit usually refers to a low credit score or a history of missed payments, defaults, County Court Judgments (CCJs) or insolvency. Lenders use credit scores to assess how reliable you are when it comes to repaying debt. If you have a history of late payments or financial problems, your score may be lower, which makes you appear riskier to lenders.

Both your personal credit score and your business credit profile can be taken into account, depending on how your business is structured and how long it has been trading.

Can you still get a business loan?

Yes. While traditional banks may be reluctant to lend to applicants with bad credit, there are alternative lenders who take a more flexible approach. These lenders focus more on the strength of your business, your recent trading history, cash flow and the purpose of the loan rather than relying solely on your credit score.

If your business is profitable or has strong turnover, you may still be considered for a loan even if your credit is less than perfect.

It is worth noting that loans for people with bad credit often come with higher interest rates or require a personal guarantee. This means you may pay more overall and could be personally liable if the business cannot repay the loan. However, if the funds help your business grow or stabilise, it may still be a worthwhile option.

Types of loans available

Some of the most common options for business owners with bad credit include:

• Secured business loans: These are backed by business or personal assets such as property or equipment. Because the lender has collateral, they may be more willing to approve the loan.

• Unsecured business loans: While harder to obtain with poor credit, some lenders offer these if your business has a strong cash flow or consistent revenue.

• Merchant cash advances: These are based on future card sales. The lender provides a lump sum, and you repay it as a percentage of your daily card takings.

• Invoice finance: If you issue invoices to customers, you can borrow against the value of your unpaid invoices. This allows you to unlock cash without waiting for clients to pay.

• Guarantor loans: These require a third party, often with a stronger credit profile, to guarantee the loan in case your business is unable to repay.

Each of these products has its own pros and cons, so it is important to consider the total cost of borrowing and any associated risks before proceeding.

How to improve your chances of approval

Even with bad credit, there are steps you can take to make your application more attractive to lenders.

Start by preparing a strong business plan that clearly outlines how the loan will be used and how your business will generate enough income to make repayments. Include financial forecasts, profit margins and any recent improvements in performance.

If your personal credit history is poor, try to build a better business credit profile. Make sure your accounts are up to date, pay suppliers on time and register with a business credit reference agency if possible.

You should also be honest with lenders. Hiding past issues or providing inaccurate information will damage your credibility and reduce your chances of success.

Some lenders may offer pre-approval checks that do not affect your credit score. This allows you to explore your options without risking further damage to your profile.

Risks to consider

Borrowing money with bad credit should be approached with care. High interest rates and strict repayment terms can strain your cash flow if not managed properly. If you are asked to sign a personal guarantee, you could be personally responsible for the debt if the business fails.

Before taking out a loan, consider whether alternative options might be available. This could include borrowing from friends or family, seeking investment, applying for grants or exploring government-backed schemes.

Always compare multiple offers and read the terms carefully before signing any agreement.

Final thoughts

Getting a business loan with bad credit is possible, but it requires careful planning and realistic expectations. While your options may be more limited and the cost of borrowing higher, many lenders are willing to consider the bigger picture and assess the health of your business, not just your credit history.

By showing that your business is viable, demonstrating responsible financial behaviour and understanding your obligations, you can still secure funding that supports your growth and recovery.

If in doubt, speak to a financial adviser or specialist broker who can help you navigate your options and find the most suitable lender for your situation.