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How To Get A Business Loan With Bad Credit

Jan 13, 2022 | Insights

If you need finance for your organisation, but you’ve got a bad credit score, don’t stress! You may still be able get a business loan with bad credit, it might just be a little more difficult. We take you through nearly everything you will need to know before you apply, so you can increase your chances of getting your business loan approved.

What is a business credit score?

A business credit score (also called a credit rating) gives a lender an idea of how likely your organisation is to repay any credit or loans on time and in accordance with their loan agreement.

This score is compiled by credit reporting agencies in Australia. Lenders and other credit providers (like suppliers who offer extended payment terms) will check your credit score when you apply for loans or credit.


What factors can affect a business credit score?

Factors that can affect your business credit score include:

  • The track record of your organisation in repaying creditors on time and in accordance with their credit contracts. If your organisation has missed or made late payments in the past, this can negatively affect your credit score for up to five (5) years.
  • Any legal action that creditors have taken to recover your business debts in the past.
  • Any unsuccessful credit applications your organisation has made in the past.
  • How long you have been operating (newer businesses are generally perceived as higher risk as they don’t have a significant repayment history to build up their credit score with the reporting agencies).

You can check your credit score online via reporting agencies like Equifax, Experian and illion. The scoring systems of the different agencies vary, but the higher your score, the better. Any credit score below 600 is generally considered to be a bad score.

If you have a bad business credit score, a lender may:
1) reject your finance application; or
2) approve your finance with stricter conditions (for example, with higher interest rates and fees).

What if I don’t have a business credit score?

If you’re just starting a venture or you have been operating a business for less than a year, you will likely not have a business credit score yet. In this case, your personal credit score will most likely be assessed instead. Your personal credit score is based on your track record of paying your personal debts on time and in accordance with the respective loan agreements and contracts.


How to increase your loan approval chances if you have a bad business credit score

Some ways to increase your chances of getting loan approval if you have a bad business credit score can include:

    • Improving your credit score before you apply. You may be able to do this by repaying any overdue debts and making all your current repayments on time and consistently for several months.
    • Developing a solid business plan. This plan should include a realistic cash flow budget that demonstrates that your organisation can afford the loan repayments in accordance with a loan agreement. This will generally be the main concern of any lender when assessing your loan application, along with your credit score.
    • Providing as much supporting financial documentation as possible. This should include whatever is requested by the lender, which may include your most recent bank statements for all accounts that your business holds, as well as other financial documents, such as your recent business activity statements (BAS) and tax returns prepared by your accountant.


Alternative small business finance options if you have a bad credit score

It can be hard to get a large, long-term loan from a bank if you have a bad business credit score. Other finance options that may be available to you from banks or other lenders may include:

A smaller, short-term business loan

These smaller loans are generally less risky for lenders and have a shorter loan term which can range from six (6) months to two (2) years. They can allow you to build up your credit score over the short to medium term so you can hopefully apply to borrow more in the future.

Invoice financing

Invoice financing may allow you to turn your unpaid invoices into a line of credit that you can access as needed. The unpaid invoices are often all the security the lender needs.

Equipment finance

A loan for equipment may give you the funds your organisation needs to buy business equipment, which can then be used as security for the loan. This means that the lender will likely be able to repossess and sell the equipment if you don’t repay the finance. This also means it is a secured loan which may be easier to get approved for when you have bad credit, rather than an unsecured loan.

Credit cards

Credit cards can sometimes help to cover short term cash flow gaps. However, it’s important to understand that credit cards often come with a high interest rate, so they’re often best used for smaller, short-term finance needs rather than financing big purchases.

Business car finance for bad credit

If you need a car loan for business use, vehicle finance for bad credit might be right for you. This type of business car finance is designed specifically for organisations with bad credit — so there are usually no tricky assessment hoops to jump through!

Some of these products can be quite costly or might not be available depending on the purpose you need finance for. If you need finance now and don’t have time to improve your credit score over the next few months, you may like to speak to a lender who specialises in business loans for bad credit to discuss what your options are and what may be available to you.

Speak to a lender who specialises in business loans for bad credit

We here at Finance One Commercial, understand that your past credit history may not accurately represent your current creditworthiness. Just because you’ve had some credit mishaps in the past, doesn’t mean you will have in the future. We acknowledge the learning curve that people go through after experiencing bad credit, so we’re happy to try and give them a second chance at finance whenever possible.


Business loans for cars and equipment with bad credit

When purchasing a business vehicle or equipment with Finance One Commercial Corporate Loans, the purchased asset is used as security. Our corporate loans are tailored specifically for people with bad credit, so gaining approval is usually quite quick and easy.*

With a secured business loan (also known as a chattel mortgage), the lender will gain ownership of the asset if you default on the loan. So if you do happen to slip up, your security asset will hopefully be there to help repay the lender.

Business loans for bad credit can give you the opportunity to grab hold of the opportunities presented to you, while also allowing you to improve your credit score by keeping on top of the repayments in accordance with the loan agreement.

If you’re looking for business car finance or a business loan for equipment, get in touch with Finance One Commercial today — we’d love to let you know what your options are.




*Approvals are subject to satisfactory documentation being provided to assess the loan application. Normal lending criteria apply. Fees and charges are payable. Terms and conditions apply.

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.

When applying for finance with Finance One Commercial, all normal lending criteria apply. Fees and charges are payable. Terms and conditions apply.

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Makala Elliott

Makala is the Marketing Manager at Finance One. She has worked in the Finance and Lending industry for over 10 years, gathering a wealth of experience. She is passionate about helping Australians get back on track with their finances by passing on her knowledge.

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