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Can I get business funding with bad credit?

For most startups and growing businesses, access to loans and additional finance is a critical part of funding the expansion and development of your company. But what happens if your credit rating is affecting your funding options?

Well, with over 300 lenders in the UK, chances are there will still be a solution for funding if you have bad credit.

Why have I got a bad credit rating?

The first step is to understand the current situation with your credit. Sometimes a low score can be simply due to the fact that you have moved around a lot, or are not on the electoral roll. Or it could be any of the following:

Late payments – it can be hard to keep on top of your finances as a small business, but if you’ve been late paying invoices, even if it’s just due to an administrative error, this can affect your rating.

Existing court orders – if you have business county court judgments (CCJs) ordering you to settle overdue payments, or winding-up orders forcing a previous business to go into liquidation, these will definitely be seen as negative by any potential lenders.

Director’s finances and history – if you, or your fellow directors, have a poor personal credit history, instances of bankruptcy or involvement in previously failed business ventures, this is also likely to impact on your credit rating with lenders.

You can use tools like ClearScore to get a good idea of your current situation and plan accordingly.

Now, it’s important to remember that any lender you apply to is going to need to carry out a search on all of the directors within the business. So if you know there is anything that may raise questions from an underwriter, it is best to be honest upfront. If you don’t and it pops up it may look like you were trying to hide this information.

What’s the impact of a bad credit rating?

It can be nerve wracking facing up to bad credit, but even if you have previously missed some payments it’s certainly not the end of the world. We are all human and can hit difficult times.

An underwriter would just want to understand what happened, how you dealt with it and what the current situation is. If they can get comfortable with it then they will look to try and support your business.

It’s worth remembering that as much as you need finance for your business, a lender needs to lend money for its business to work.

One of the other factors that will affect if you can be approved for funding is the type of finance you are looking for. An unsecured loan might have a lower chance of success depending on the extent of your credit while other facilities may have a higher chance of being approved.

What finance options are there with bad credit?

Business loan – often just backed by a personal guarantee, it could be seen as a riskier way of lending so they may look to get to an offer either with a shorter term or maybe a lower amount over a longer term.

Invoice financing – if a speedy cash injection is needed, invoice financing can help by allowing you to sell your customer invoices on to a financing provider – who then loans you an agreed percentage of the overall value of these invoices. It focuses more on your current trading than your financial history which is beneficial if you have credit issues.

Asset financing – asset finance provides funding against the value of the existing assets on your company balance sheet (again focusing on what you have currently) – things like machinery, equipment or vehicles. Using this additional funding you can boost working capital, or invest in new assets.

Secured finance – with available equity in your commercial or residential property it could be beneficial to use one of these properties to help with your funding needs. This may also allow you to raise more than a business loan and even spread it over a longer period to help manage your cashflow.

Helping you access funding

Whatever your situation or need, our experts at Fluidly are on hand to discuss your options further. With years of experience working with all different types of business owners, we will be able to point you in the right funding direction.

Talk to us about managing your cashflow and funding needs today.

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