Small businesses, though, often need the most help to get off the ground, and taking out debt can feel nerve-wracking.
There are many benefits to being able to borrow money in order to grow or sustain your business. However, if you’ve struggled with debt in the past, you may feel reluctant to apply for a business loan, or find that a low credit score is standing in your way.
Thankfully, at Finance One, a poor credit score doesn’t need to stop you from borrowing money for your business — it is possible to get a business loan with bad credit? We’ve written the guide below to help you understand your options for sourcing business finance when you have a bad credit score.
At Finance One Commercial, we are one of Australia’s leading online lenders who support businesses with a bad credit history. We can consider lending your small business money, provided:
- You’ve held your ABN for a minimum of 6 months.
- Your business is generating income.
Even if:
- You have poor or no credit history.
- You’ve been discharged from bankruptcy or experienced insolvency in the past.
- You or your business has defaults on your credit file.
To get your small business loan application underway, you can
apply now. Otherwise,
contact Finance One Commercial today to discuss the next big move for your small business!
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What are the different types of Business Loans?
There is a myriad of different business loans available to Australian business owners. Knowing what finance solution is going to be the best for you and your business does take some groundwork though, we’ve provided a general summary of the most common business loans:
Traditional banks have long been lenders for established businesses and start-up businesses alike. Many business owners look to big banks to finance their business needs, assuming they may have the lowest interest rate or best loan terms. This isn’t necessarily true these days, with a range of lenders now in the business loan market.
Traditional lenders can also take weeks, if not months, to arrive at a lending decision and typically set their lending criteria geared towards applicants with good credit. This means that even small loans might be out of reach if you’ve got a bad credit score, and if you are approved, you won’t have quick access to a lump sum payment — you could be waiting months.
Invoice financing is another form of finance for businesses, but it relies on your business invoicing other businesses in Australia and may not be the most appropriate for your needs, especially if you run a small business.
An equity loan is a type of business loan that uses a commercial property or residential property as security against your business loan. Some people think that because an equity loan is a secured loan, they are guaranteed to be approved. However, there is no such thing as guaranteed approval for any loan type — including small business loans. The other downside to using equity loans is that, if something happens with the business and you can’t repay the loan, you’re putting your home or commercial property at risk of being sold to repay the debt.
If you don’t have any collateral to offer a credit provider, or you’re a start-up business, chances are you’ll need to look at an unsecured loan. Most lenders will look to charge a slightly higher interest rate for an unsecured loan, particularly if you are a start-up; that’s because they have no real way of assessing your creditworthiness as a business entity. This being said, if you are looking for a way to finance the purchase of
business equipment such as a car, tools, earth moving gear or even a food truck, your lender could use the equipment as security for the loan, which may mean you get a lower rate.
Getting a Business Loan with bad credit
When looking at business loans when you have bad credit, it’s handy to know the difference between your personal and business credit history. Almost every lender is required to run credit checks, so it’s important to understand how the result of a credit check may affect you. Poor credit history and limited cash flow are
two of the biggest factors that prevent business owners from getting a small business loan!
Your personal credit score
As you might be aware, your personal credit rating can impact your chances of a personal loan approval, but did you know that your credit history can also affect a business loan application? Especially when your business is in the start-up phase, if you’ve never had credit accounts for your business, or if you’re applying for an unsecured loan, lenders may fall back on your personal credit report to assess the application and ask you to provide details of your personal credit file.
Your personal credit file has details relating to you personally. It includes details such as credit enquiries you’ve made for personal finance, your repayment history (including if you’ve missed any loan repayments) and even, in some instances, when your bank accounts go into a negative balance.
Your business credit score
Just as your personal credit history lists your financial conduct, your business’s credit history will showcase details pertaining to your business. Details of your trading history, your open credit products, any missed payments and listed defaults will show up on the credit file for your business.
The benefits of bad credit Business Loans
Many lenders will impose quite strict lending criteria when it comes to lending to businesses. This means that a business owner with a bad credit rating may not be eligible for the financing they need for their business.
With a Finance One Commercial bad credit business loan, each application is assessed based on its own merits, so the final decision doesn’t come down to the credit check.
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Eligibility for a bad credit Business Loan
Your loan options or potential lenders may be limited if you have bad credit, but that doesn’t mean they’re non-existent — you just need to find the right lender!
At Finance One Commercial, we are one of Australia’s leading online lenders who support businesses with a bad credit history. We can consider lending your small business money, provided:
- You’ve held your ABN for a minimum of 6 months.
- Your business is generating income.
Even if:
- You have poor or no credit history.
- You’ve been discharged from bankruptcy or experienced insolvency in the past.
- You or your business has defaults on your credit file.
To get your small business loan application underway, you can
apply now. Otherwise,
contact Finance One Commercial today to discuss the next big move for your small business!
Disclaimer: The information above is of a general nature only and does not consider your personal objectives, financial situation or particular needs. You should consider seeking independent legal, financial, taxation or other advice to check how the information relates to your particular circumstances. We do not accept responsibility for any loss arising from the use of, or reliance on, the information.
