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  • Writer's pictureMatt Bowler

Sourcing Finance With Poor Credit History

Updated: Aug 10, 2023

What is a bad credit score?


A poor business credit score indicates that your company is unable to repay debts both either in a timely manner or in full. Banks, lenders and suppliers will evaluate your credit history, by running a soft search and will look at your payment performance, amount, frequency and promptness of repayments.


If your credit score is low, your business is likely to be perceived as a high-risk borrower, which may affect your supplier terms and access to funding. While traditional banks may less likely provide you with the finance you want, you can connect with lenders who specalise in offering business loans to those with bad credit.


Why is it important to have a good credit history?


To ensure the best rates and smoothest process to obtain finance, you’ll want to ensure you’ve built a solid business credit score. Unsurprisingly, your business credit score is similar to your personal credit score, but for your business. Whilst more nuanced than your personal credit score, paying debt and bills on time and having detailed financial history will typically mean a higher score.


If you have a poor business credit score, getting accepted for a commercial mortgage will be more difficult. Having a high credit score indicates that you’re a responsible company or owner who pays their debt on time. This is amongst the most important tips for getting a successful commercial mortgage.


On the other hand, if you have a low commercial credit score, it will make it harder to get approved, and may also lead to less favourable terms, including higher interest rates.

Therefore, a good commercial credit score is crucial to a smooth business mortgage application. Knights Row can assess your credit score with you and provide insight into your score.


Where can I source bad credit business loans?


We know it's possible for loans for businesses with bad credit, but exactly how do you source them?


Keep reading below to find out…


What type of loan can I get?


● Merchant cash advance

● Secured business loans

● Unsecured business loans

● Asset finance

● Invoice finance


What do lenders look for?


Lenders will either run a soft or hard search to look at your credit history. To evaluate whether you’d be a good fit to allow a loan, they will be looking at the following:


Business sales, annual turnover and profit

Years of accounts filed

Number of years of accounts filed

Past payment performance

County Court Judgements

Winding-up orders

Reviews and testimonials


Bad credit finance can be secured from us here at Knights Row, we will guide through the step-by-step process it takes to securing your business loan.


If you have property as a security, you’ll be able to get a secured loan. However, it’s more than likely that an unsecured loan is the only viable option. No credit check business loans are even available at a much higher interest rate.


Guarantor loans are unsecured loans but require a nominated individual to cover any missed business payments. These generally offer lower interest rates than other unsecured loans.


A personal loan is also another viable option or depending on the circumstances, start-up loans are available, but require you to submit a solid business plan and financial projections for at least one year with the application.


What are the costs associated with bad credit finance?


The interest rates on bad credit finance is higher than other loans, due to the high risk of non-repayment. There may be other fees that apply for either early repayment or late payment penalties.


What to avoid if you have bad credit?


● Pay old and existing debt off on time.

● Work out payment plans that work for your business.

● Avoid applying to lots of lenders individually, as hard and soft searches appear under your credit history for up to 12 months.

● Make sure no County Court Judgements are held against your business.

● File your accounts accurately and on time.


How long does it typically take to source finance with a bad credit score?


Generally, there isn’t a lot of difference between this and a standard loan. Some loans do take longer due to the nature of the amount and the type of loan for what it’s being used for.


What security do I need to source finance with bad credit?


For businesses with bad credit, a personal guarantee to anyone with a stake 20% or more in the business, is usually enough. That way the debt is carried over to the owners of the business and not through the business.


Overall, it is strongly advised to start trying to build a good credit history by repaying the outstanding debts before applying for further loans but we understand this isn’t always an option. Speak to us at Knights Row for more help in securing your finance.


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