Can I get a business loan with bad credit?

Do you worry if you can get a business loan with bad credit? Then you are not alone, it is estimated that one in three businesses are refused a business loan with bad credit. You may think that this is an impossible challenge to overcome and may even give up before trying! Yet, you do not need to despair, if you do have a poor credit score rating and you want to apply for a business loan, you still have options. Knowing and understanding how your credit score can help you start as you mean to go on will be your first step to get your business get back into the black and apply for a bad credit business loan.

What is a Credit Score?

A credit rating is a range within a mathematical calculation used to mark, or score your financial record based on your history of borrowing money, such as a loan or a mortgage and paying it back on a regular basis. Lenders will use this financial report as an indicator of your credit and loan worthiness, in other words, the belief that the lender has in you, that the money will be repaid. A financial credit score could either work for you, or against you, when lenders are weighing up the probability that you will honour your financial responsibility, however, having a good rating will increase your chances of securing a cheaper business loan or bad credit business loan.

Having a business loan rating can be a great hurdle or mountain to overcome, but is something, with time and patience, that you can conquer. However, if you do not have the time to rebuild your personal or business credit score, you can still approach lenders to evaluate your business loan application, there are no hard and fast rules on this, but you need to be realistic with your request. Be aware they may not borrow you all the money that you requested and offer you a bad credit business loan, so help yourself by planning and preparing documentation ahead. 

Each credit reference agency will evaluate their potential borrowers’ applications using their own credit rating scores, along with their own set of criteria, making it very difficult to predict. This means that when they judge whether to accept your business loan with bad credit, each credit reference agency will rate you differently. For example, Experian has a greater upper limit than other credit reference agencies, what they will view as being ‘very poor’, will be classed as ‘good’ with Equifax. Meaning that if you fail to secure a business loan with a bad credit rating from one lender, this does not mean that another lender will refuse you for a bad credit business loan. However, in general, it is good practice to aim for the best possible score.

You need to be aware and keep in mind, that if you are thinking of taking out a bad credit business loan or credit with a lower credit score, you will end up paying a higher rate of interest, which will end up costing you a lot more for longer than you anticipated and could have a knock-on effect on your profit margin. Do not ask for more money than you need as this will be more likely be refused by the lender and put you into unnecessary debt. All you really need to do, is to clearly state why you need the money, the length of time that you want to borrow it for and how you will be able to afford the monthly payments. Conversely, having a good personal credit score improves your chances and gives you a better opportunity to access the best credit deals available, but that does not necessarily guarantee that your application will be successful for a bad credit business loan. 

If you do not have a credit score history yet, and you want to apply for a business loan, then you will either be offered a higher rate of interest, or you will be rejected outright for a bad credit business loan. Taking out credit or a loan with a high rate of interest and repaying the debt at on an easily affordable monthly payment plan over a 12-month period, can help you to become more credit worthy, but be warned, if you go over your limit, miss payments, or default, this will have a negative impact instead. Lenders nowadays have apps as well as provide you with an online account to stay on top of things. Try your best to pay off your debts as quickly as possible and once your credit score improves, you can apply for a cheaper rate, but do not take out too much credit at once, apart from making it more expensive to keep up, lenders will notice this and question whether you can afford the extra payments for a bad credit business loan. Nevertheless, having a good credit rating will increase your chances of getting a lower interest rate business loan or credit with a shorter time to pay it back in, meaning you pay less overall.

How do I know what my Credit Score is?

Starting, operating, or sustaining a business can be very challenging time, particularly when you are facing financial hardships. If you have not done so already, check your current credit score rating to help you evaluate where you are and where you want to be in the coming months and years to help you apply for a bad credit business loan. You can use any, or all of the following top three credit reference agency tools, where you can also access your free credit report. They all have an initial free period before they will start to charge you a fee, you can choose to use it on a monthly, quarterly, or yearly basis to keep track of your rating:

  • TransUnion (formerly CallCredit) – Credit Monitoring Service (scores up to 710).
  • Experian – Trusted and regularly used by money lenders to check your score (scores up to 999).
  • Equifax – Helps you to improve your credit score (scores up to 700).

Alternatively, you can use the following free tools to track your credit score progress, they will also help to matches you with loans and credit cards that you may be eligible to apply for:

  • Com/creditclub – You can access your credit score and check before you apply for credit, without effecting your score.
  • ClearScore – Free Equifax report and credit score.
  • Noddle – Keeps a record of your Credit score and helps to match you with cards and loans that you may qualify to apply.

Although you will need to do your initial research to find lenders who are willing to offer you a business loan with bad credit. Finding the right solution for your existing business or start-up will also help you to increase your financial credibility. When you ready try to answer the following questions:

  • Can you realistically pay it back within 5 years?
  • Has your business been operating for 2 years or more?
  • Do you have a detailed business plan?
  • Do you need to Purchase stock to complete an order?
  • Do you need to hire employees to grow your business?
  • Can you personally, put up collateral such as property?
  • Have you written a detailed, solid business plan, mapping out your business strategy and financial forecast?
  • Assessed your business and environmental risk factors?
  • Increased your annual revenue turnover?
  • Can you get a guarantor to back you that has collateral?

How does my personal Credit Score affect my Business Loan Application?

Lenders take a risk when they borrow money to businesses with bad credit, they want to know that the borrower will pay it back in full.  One way to do this is to take a look at your personal credit score, as this is an indicator of your credibility. They will check your financial record of fiscal responsibility, to use as a guide when they assess your application and the risk of your reliability to pay back the money you applied to borrow from them.  If you are bankrupt, have county court judgments against you, or you have defaulted on personal credit or a loan in the past, they will judge you as a person who also has a good chance of not being able to manage your business’s financials as well.  

As previously mentioned, getting a bad credit business loan or credit is not set in stone, you can improve your chances of successfully receiving a business loan with bad credit, if you can demonstrate that:

  • Your current annual business revenue has stayed within your profit margin or has increased, and you can show a positive forecast in the months ahead.
  • You have been in business and have full company accounts and records for the last 3 years.
  • Whether or not you have other financial backers with an asset they can put up as collateral.
  • You have a Director or a business partner, with a good credit rating that can act as a guarantor.
  • If you are a limited company, lenders will check your Companies House history to ensure that you have filled in all the relevant business records and accounts.

Your Business Credit Score

Before you start applying for a bad credit business loan or credit, you need to know what your current business credit score status is, once you have this, you can then check for any discrepancies, fraudulent activities or outstanding debts that can having a negative impact on your score and try to remove them as soon as you can. Measuring your financial commitments on a regular basis, will keep you on track to building and managing your credit rating and apply for a bad credit business loan.

Just like your personal business score report, you can get top 3 credit rating agencies reports for your business, for a fee. Lenders will calculate your business credit score, in a similar way to your personal credit score:


If you are a start up and do not have a business credit score yet, lenders will default to your personal credit score instead. The same process is applied if you are looking for business loans for bad credit. However, most banks will consider your application and demand more evidence of your worthiness for a business loan with a bad credit score, including a guarantor if you do not have a joint partner or a director with a great credit rating if you would like a bad credit business loan.

How can I build up my Credit Score with a bad credit rating?

Building up your credit score to apply for a business loan with bad credit, requires you to be vigilant with your finances, and can take months sometimes years, and that requires you to be patient. Before you start applying for a business loan with bad credit, you need to have a clear plan to be ready when questions are asked about your business for your bad credit business loan. Get your documents ready so you can map your journey:

The next stage to harvesting a successful business, is to avoid putting yourself into, or staying within a prolonged period of debt, or you could end up with an acute insurmountable financial situation on your hands. Your business will inevitably suffer when you find yourself in a position where all your profits are being siphoned off to pay for high interest credit cards, loans and/or debts, leaving you struggling to make ends meet. Control and take responsibility of your finances early on by creating a balance sheet. This involves taking snapshots of your assets, liabilities, and capital, detailing the balance of income and expenditure over a previous period, on a monthly, quarterly, or yearly intervals, doing this will help you stay on top of your financial inventory and show affordability for a bad credit business loan.

If you are financially performing better than expected, you can evaluate whether the extra money can possibly be put towards paying off your debts quicker, potentially reducing the overall interest (be aware they could have an early repayment charge) or you may decide to set aside the money to reinvest back into the business to buy equipment, or a vehicle etc. 

Forecasting the data to factor in for example, hiring temporary and/or permanent staff, to reflect the added costs, can help you decide if it is sustainable or not, and adjust your business decisions accordingly. Testing both the top and bottom end of cash flow scenarios, can help you recognise where the strengths and weaknesses within your finances lie. What resources will you utilise to survive in challenging times, to prevent and avoid financial ruin and pay off a bad credit business loan?

Keeping an eye on your cash flow status is important to lenders and is especially important when applying for a business loan with bad credit. Staying on top of the company’s debt obligations will also increase its future financial credit status, this is handy for when you are ready to take your business to the next level. Paying on time is very important, as this helps you to stay on top of your debts and therefore reducing the interest rate. This can also reassure other potential lenders that you are serious about paying back the money you may borrow a bad credit business loan with them. In fact, this is one of the things that lenders will insist on having on your credit report. Setting up direct debit payments or regular reminders will help you to stay on track. If you cannot pay a bill on time, do not ignore it, hoping it will go away, contact creditors as soon as you can, the earlier the better. They may allow you more time to pay, arrange a payment plan or find another suitable solution to fit your individual needs. Avoiding insolvency is crucial for your business to be successful.


If you want a business loan and you may have bad credit, this will not be too much of an issue. There are various services available, with lenders who are more flexible when it comes to repayments and availability for a bad credit business loan. Ensuring that you have a strong business plan and can show affordability means that you can get a business loan with bad credit.

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