Are you looking for small business loans with bad credit?
A business loan is a type of loan taken by the business owners, or by an individual to start a company, expand the company, or emergency funds for day-to-day business operations.
But what to do if you have bad credit? Is it possible to take out a small business loan even if you have bad credit?
Yes, it is possible because your credit score doesn’t matter as much as the overall financial health of your business.
Several leaders in the UK require a minimum credit score of 500. However, you can expect to pay higher fees and interest rates if you have a bad credit history.
So, if you are looking for small business loans with bad credit you are on the right path.
Here, in this article, I will put together what is bad credit, can you get a small business loan with bad credit, how to get a business loan with bad credit, and the top 5 small business loans with bad credit.
Let’s dive into the deep!
What Is Bad Credit?
While applying for a business loan, lenders will use a business owner’s credit score to determine creditworthiness.
Moreover, if the business is a startup, the lenders pay much attention to the business owner’s credit score. but, as you grow your business’s payment history over time, lenders start to rely on the business’s credit score.
Personal Credit Score
The lenders and the credit bureaus consider a FICO score of 670 or more to be a good credit history.
Anything less than 670 is considered a bad or fair credit score. Furthermore, the FICO system again breaks down credit score ranges to define poor and fair credit scores.
- Bad Credit: 300 to 579
- Fair credit: 580 to 669
- Good to excellent credit: 669 and more
Business Credit Score
Business credit scores use a range of factors and are reported through a range of credit bureaus. The business credit score also looks different from the personal credit score. It ranges between 0 to 100.
- Bad credit: 1 to 49
- Fair credit: 50 to 79
- Good credit: 80 to 100
Can You Get A Small Business Loan With Bad Credit?
You can get a small business loan having a FICO score of less than 670. However, you may be required to pay higher interest rates while obtaining a small business loan with bad credit.
Your credit score reflects the history of paying the debts and expenses. So, a credit score is considered an indicator of how you pay attention to repaying a business loan.
If you have a bad or fair credit score, you will have limited loan options. Besides, getting a business loan will depend on the willingness of the lenders to take on the risk of lending you money.
How To Get A Business Loan With Bad Credit?
You can take a few of smarter steps to increase the chances of obtaining a small business loan with bad credit. These include:
1. Update Your Business Plan
A business plan is evidence that shows the strategies for your growing business in the long run. many lenders look for a strategic business plan especially if you are a startup.
If you do not have your business plan in writing, you can update the plan you already have. You can update these key areas of your business plan including market research, budget, future revenue, and goals of your business.
2. Choose The Right Type of Bad Credit Small Business Loan
You can have a large number of small business loan options at your fingertips.
You must remember that different types of business loans can be accessed for different purposes. So, when choosing a business loan, you must keep in mind:
- When you need a loan
- The loan is for what
- Which loan will give you the best interest rates
- The repayment option you need
3. Choose The Right Lender
Different lenders have different lending policies. Some of the lenders tighten and some of them loosen the requirements of credit scores.
This is based on their willingness to take risks and their mission. Here, I am providing a few of the factors that you should consider while opting for a business loan.
Shop around with different lenders
Different lenders offer different loan types, repayment options, and rates of interest. You can compare various lenders who are willing to provide a business loan with bad credit.
Finally, after evaluating the different features of the loans offered by different lenders, choose the most suitable one.
Compare interest rates and fees
Various business lenders charge different fees associated with the business loans. Bad credit lenders also charge a higher rate of interest.
So, you must take a while to check which bad credit lender offers you the most suitable loan.
Check the minimum criteria to apply
Different lenders set different minimum criteria to apply for the loans. If you meet those criteria you are eligible to apply for the loan.
These criteria include your credit score, annual revenue of the business, time in business, and some other factors.
4. Show strong Finances
Lenders evaluate your past credit history to know how you can handle your loan repayment. apart from your credit score, your business finances also play a great role in getting approved for a loan.
You need to consider the following criteria to get approved for a business loan.
Annual revenue
If you can prove a strong flow of revenue for your business and you have not missed any vendor’s payment then the lenders will approve your loan.
Online lenders want to see a minimum of $100,000 in revenue, while traditional bank lenders want $150,000 to $250,000 in annual revenue.
Cash flow
Lenders may check your recent bank statements, visually for the last three months. They will check if there is a positive cash flow through your business.
Apart from the annual revenue, cash flow is an important criterion set by the lenders to get approved for the loan.
Time in business
You may also need to meet time in business criteria to get approved for a business loan.
Typically, the traditional lenders want 2 years and the online lenders seek for a range between six months to two years.
5. Improve Your Credit Score
If you are looking for a business loan in the long run, for now, you can wait and then take time to build your credit score.
Here, I am providing a few strategies that you can initiate to improve your bad credit score.
Check your credit report
You must understand your personal and business credit score upfront before you start applying for a business loan.
Thus you can understand what loan you are eligible for. If you see there is any error in your credit score, you can immediately contact the credit bureau and correct the errors.
Mind your credit utilization
You must work hard to reduce debts such as lines of credit, credit cards, and more. You can also request to increase your credit limit. So, you must be aware of the credit utilization.
Make payments on time
You can set up automatic payments for all loans, business suppliers, and utilities. In this way, you will not miss any repayment by chance.
Apply for a credit card
You can apply for a business credit card and can jumpstart your positive payment history. You can put everyday expenses on the card and also repay them within the grace period with no fine.
However, not every business credit card is available for bad credit scores.
Top 5 Small Business Loans With Bad Credit
1. LoanBuilder-PayPal
PayPal is a popular online payment system, now it offers short-term small business loans, LoanBuilder. Loan terms are a maximum of 52 weeks. You only need a 580 credit score to qualify for this business loan.
Pros:
- Minimum credit score 580
- Loan terms between 17 and 52 weeks
- Receive funds on the next business day
Cons:
- Must have business revenue of $33,330
- Borrowing fee due at payoff
2. OnDeck
OnDeck is a popular bad credit business loan. OnDeck is best for repeat loans because it allows you will have the opportunity to apply for more money after repaying half of the original loan.
The amount of the loan depends on your business revenue.
Pros:
- The minimum credit score required is 625
- Same-day funding is possible
- You can have the opportunity to apply for more money after half of the loan is being repaid.
Cons:
- High-interest rates
- Your business must have at least $100,000 in annual revenue
- Requires daily or weekly payments
3. Credibly
Credibly is one of the lenders that offer loans to the minimum credit score.
To qualify for a small business loan, your business must have a minimum cash flow of $15,000 per month.
Pros:
- The minimum credit score requires 500
- Available to the small businesses of 6-month-old
- Getting the funds as soon as possible
Cons:
- Daily or weekly payment
- Higher fees
- requires revenue of at least $15,000 per month
4. Rapid Finance
Rapid Finance is one of the best small business loans with bad credit. Here, you can borrow up to $1 million based on your monthly revenue.
Rapid finance offers the loan terms of up to 60 months. When you apply for a loan, you may get approved within hours.
Pros:
- Loan terms are available for up to 60 months
- A minimum credit score is not required, the lender will check the entire health of your business
- Funds available within hours of applying for a loan
Cons:
- Repayment details are not available online
- Daily, weekly, or monthly payments
5. Lendio
If you are looking for flexible financing, you may go ahead with Lendio. this is one of the best lines of credit options for small businesses with bad credit.
Here is no obligation to use all the funds. Also, you do not need to repay for those unused funds.
Pros:
- The minimum credit score required 600
- You only pay the interest on the used funds
- Application takes only 15 minutes
Cons:
- Must have $50,000 or more for your business’s annual revenue
- Loan terms are one to two years
- Funding takes one to two weeks
FAQ
What is the easiest loan to get with a bad credit score?
Ans: If you have a poor credit score, getting a secured loan will be the easiest loan to get approved. The bank or the lender will have an asset as collateral.
It can be your home, car, or anything else. If somehow, you fail to repay the loan, your risk repossession will repay the loan.
Can I get a business loan with bad credit in the UK?
Ans: Yes, various lenders in the UK offer business loans with bad credit. however, the interest rates are comparatively much higher than the others.
There are also fees associated with early repayment and late repayment. So, before applying for a loan, you must check all the criteria set by the lender.
Is it difficult to get a business loan in the UK?
Ans: It is not very difficult, but yes you need to put some time into researching the right lender. Some lenders consider the overall health of your business and credit rating.
It also depends on you, what type of business loan you are looking for, and what the term you are searching for.
Before accepting any loan deal, you must understand the terms, repayment options, and interest rate. You should go ahead with the loan whose repayment you can afford.
Conclusion
Looking to grow your business, or just need extra capital to keep your business moving? However, getting a business loan is quite easy but when it comes a bad credit, sometimes it gets challenging. Don’t get stressed. here, in this guide, I have put together every detail of getting small business loans with bad credit.
You can go through my article and take the initiative mentioned in the article to improve your credit score. But, if you can’t wait for long, choose one small business loan provider from the list. Show your business a new way with the borrowed fund while keeping the repayment on time!
