Finding a business loan when you have a bad credit score

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Finding a business loan when you have a bad credit score can be difficult. In fact, even the Government-backed loan company, designed to help small business, states on its website that ‘your application will be assessed individually based on the information you provide, a credit check obtained from a Credit Reference Agency and our internal credit policy.’

Which can be a nightmare because, even when you’ve got a killer business idea, a poor credit score, can make it almost impossible to find a business loan and to get it off of the ground.

In fact, banks and traditional lenders are very unlikely to give you a hand if you’ve got a poor credit score, unless you’ve got a house to put up as collateral, which can be a massive risk when you consider the ebb and flow of income as you start a new business.

However, a poor credit score shouldn’t stop you from pursuing your dream and applying for a business loan. There aren’t any quick fixes, but if you’re really determined to start your own business, there are lots of things to do to bring in the capital needed upfront.

Improve your credit score to get a business loan

We know, this is a lot easier said than done. But if you can delay your plans for a little while and tackle the issue at its root, you’ll find the upfront capital a lot easier to get. By improving your credit score, you’ll not only find that there are far more loans available to start your business, but that your repayments and APR will be lower too – definitely a win/win.

If you can’t wait, look around for specialist loans

They’re rare – but they are out there. A few lenders are willing to take a bit of a risk (in their eyes) on you and your business. Although bear in mind that none of them are particularly big name lenders so it’s wise to use your discretion and best judgement when you’re looking into them. Keep a keen eye out for sneaky clauses in the contracts or extremely high interest rates. At the same time, don’t be afraid to look outside of the high street for funding options, there are lots of better and more suitable deals available for businesses than are available from high street banks.

Friends and family and peer-to-peer lending

If the business loan avenue fails, don’t give up. Short of a pitch on Dragons’ Den, there are still several other – arguably better – options to fund your dream business.

Friends and family

Friends and family – the old fail safe. But for starting your own business, they can be an absolute godsend. Whether it is with help to buy a few pieces of equipment you need to start or with a cash injection to get you started, friends and family are normally more than willing to help you out if they can. Be careful to explain how much you anticipate to earn, and be honest with them about when you expect to repay them – starting a new business is incredibly stressful, without worrying about leaving your friends and family out of pocket for longer than expected if you hit a bit of a trough.

Peer-to-Peer lending

We’ve spoken about Peer-to-Peer lending before for emergency borrowing, but they’re also a great way to raise enough cash to start a business. Much like borrowing from a friend, you can also now get a business loan from a complete stranger online.

Peer to Peer Lending sites have been designed to create a space that helps you to borrow from individuals that are willing to lend you the money you need. In many cases, these people are willing to offer you much better repayment terms than you’d get from a bank.

However, beware: P2P lending is still a relatively new method of lending and borrowing money and is still not as closely regulated by the FCA. However, all in all, borrowing from P2P sites comes with the same risks that you’d get from a bank loan – but often with lower rates for those with a good credit history.

Think about an unsecured or guarantor loan

Of course, you can borrow money through a personal loan that you can use towards your business. Unsecured and guarantor loans are a great way for people with poor or no repayment history to borrow large amounts of money.

Guarantor loans, for instance, are a great way for your family to help you start a business, without having to dip into their own pockets. By vouching for you with the lender, they can help you borrow up to £8,000 to put towards starting out on your own.

If you’d like to see how much you could borrow from Bamboo to start your business, have a look at our quote calculator today. If you qualify, the money could be in your account and you could be in business within 24 hours. Representative 49.7% APR. A guarantee may be required.

One thought on “Finding a business loan when you have a bad credit score

  1. It’s actually a cool and useful piece of information. I’m happy that you simply shared this useful info with us.
    Please keep us informed like this. Thank you for sharing.

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