Business Loans for Bad Credit Status Companies

Getting a loan always seems easy for the other guy – the company that’s already doing well, with a solid credit history, and comfortable customer base.

But what about the business that has been struggling and is now suffering with a poor credit score? Is it possible to get a business loan if you are a company with bad credit?

Thankfully, the answer is “yes”.

Here at Cashflow Solutions, we have the expertise to help.

Why Bad Credit Affects Your Loan Application

Lenders are always looking at the risk of any loan. What is important to them is that repayments are made on time and the money is returned to them plus any interest accrued.

What a lender doesn’t want, is to loan money to a business that subsequently folds, potentially never repaying back the debt.

Your credit score (also referred to as your credit rating, or credit history), is a measure of your past financial activity. It shows how you have acted previously with other financial obligations.

A good score means you are trustworthy, while a bad score unfortunately means the opposite.

However, your credit score is not the only information a potential lender has to go on. Thankfully, there are many other things that you can do to help improve that trust and show that you are a company worth taking a risk on.

Other Factors That Make Up a Lending Decision

In addition to your credit report, lenders will look at many of the following:

• Annual turnover and profit – So you’ve had a rocky past, it doesn’t mean your figures today are bad. Lenders are keen to see your current figures to see if your business is viable and doing well right now.
• History of filed accounts – Have you been trading for a long time and are all your filings up to date? A company with properly filed documentation shows it is administered well and if you have been in business a while, that helps build confidence for lenders.
• County court judgements (CCJs) – How bad has it been? Companies with a string of CCJs filed against them will fare poorly, while those who have struggled but managed to do their best despite adversity will be looked on favourably.
• Business plans and history – Do you show a history of proper strategy and planning? Are your forecasts up to date? Do you have good project plans for additional expansion outside of the normal running of the business? Your business plans are another sign of a well-administered business.
• Business assets – Does the business have anything it can use as collateral? Secured loans, guaranteed against valuable assets are available even if your credit score is low.
• Credit history of directors – Lenders may look not just to the company credit history, but also into the credit reports of those who own and run the business. If your personal finances are well taken care of, then the risk of lending to the business is lowered.

With all these other aspects making up your loan application, it’s important not to be put off simply because of a poor credit score.

Improving Your Business Credit History

In the desire to get a loan, it’s easy to inadvertently do damage to your business credit score. Repeated application for loans will make you look desperate, lowering your score and showing your company to be a potential risk for lenders. It’s important to take a step back and properly work on a plan to improve your businesses credit rating.

Some ways this can be done include:

• Be patient – Time is a great healer and this is as true for your credit score as with anything else. The last three months are the most crucial period for your credit history, so ensuring you have three months of good activity before trying for a loan will go a long way to helping.
• Making payments on time – Make the decision straight away to start healing the credit report by prioritising all your outstanding debts and payments. Without borrowing more money, do what you can to make sure everything is paid on time.
• Consider a credit card – Company credit cards are a great way to build your credit score. Even a card with a low limit will help by showing good financial management by making those regular repayments. Credit cards are more forgiving than other types of loans and it is often possible to get one where other lenders would reject you. Many types of credit card exist for companies with bad credit – they will have a higher interest rate than other options, but will be more lenient on the application.
• File your accounts accurately – Making sure your accounts are properly filed on time is essential to maintaining a good credit score.

Loan Options for Businesses with Poor Credit

There are many financial solutions available that are specifically designed for businesses suffering poor credit. At Cashflow Solutions, we are able to help you find the best product to suit your business.
These include:

• Asset-based loans – Asset-based lending is a type of secured loan that is often available to companies with bad credit. With an asset-based loan, valuables owned by the company such as equipment or vehicles are used as collateral to guarantee the loan. Not only does this provide a business with bad credit a way to secure a loan, but it can mean lower interest rates as the lender is less at risk than with an unsecured loan.
• Asset finance – An alternative to a loan, asset finance provides a way to spread the cost of equipment, vehicles, or other assets across the months. While not as flexible as a cash loan, asset finance can help with cashflow and give your company access to the tools it needs to expand.
• Grants – Though the criteria for obtaining a business grant can be very specific, it is possible that a grant exists that will fit your company’s need and offer that much needed boost.
• Credit cards – Mentioned earlier, a credit card is an excellent option for companies that are finding other loans difficult to obtain due to poor credit history. Specialised credit card options exist for the express purpose of helping bad credit businesses get access to much-needed short-term funding.
• Overdrafts – Many banks will offer overdraft facilities even while businesses are working to improve their credit score. These offer a solution to cashflow problems in the short term that can be advantageous while rebuilding your credit score.
• Unsecured loans – There are a wide range of lenders who offer specialised unsecured loans to businesses with bad credit. These lenders understand the difficulties businesses face and have developed financial products with them in mind.
• Government assistance – In some specific cases, there are government schemes available to help businesses secure loans that might otherwise be unavailable. One example of this is the UK Recovery Loan Scheme, put in place to help companies grow following the difficulties of the COVID-19 pandemic.
• Peer-to-peer lending – Alternative lending options, such as peer to peer lending often operates under slightly different criteria than the major lenders and can offer a strong solution for companies who are otherwise finding their loan applications rejected.
• Consolidation loans – While a consolidation loan will not provide you with additional funds, it is an excellent way of getting your financial obligations in order. A consolidation loan for a company with bad credit will pay off all outstanding debt, leaving you with a single manageable repayment each month and opening the avenue for more funding a little further down the road.

Getting Help to Obtain a Bad Credit Business Loan

Cashflow Solutions is here for you to help you get the business loan you need. Our team of impartial specialists have a comprehensive understanding of the options available and will be able to assist you in getting funding for your company.

Contact us today to discuss your specific circumstances and get expert advice.

Working in partnership with our lending partners backed by the British Business Bank to deploy funds to support business growth and working capital

• Our connections to funders are second to none.
• We will use our experience to select the right lender to approach on your behalf
• We conduct diligence on each application before it goes – we like to answer the lenders questions before they ask them.
• We will produce a short credit paper which will go alongside your application.
• We can produce the cashflow for you in a format that will be acceptable to the lender
• We will ensure that your application is supported by all the key documents needed – if you make it easy for the lender it will cut days off the process and increase your chances of approval.