Is It Hard to Get a Business Loan With Bad Credit?

As a business owner, applying for a loan to ensure the continuity of your business operations is sometimes a necessity. Your options through traditional loan providers become very limited if you happen to have bad credit. Even if you happen to secure a loan, it comes at the cost of very high-interest rates to mitigate the bad credit score

However, worry not, as there are alternatives to securing a business loan, even with bad credit. There are many options when it comes to business loans available today. So if you are looking for funds to help you with your business operations, we have gathered information on different types of loans that you can apply for and get approved easily. Read on to see which one can be a good fit for your business. 

Online Credit Brokers

With the rise of technology, securing an online loan is easier than ever today. Many online brokers can aggregate different types of loans on their platform. You can apply and get approved within minutes, even with a bad credit score. Online credit brokers can provide many types of business loans which include payday loans, short-term loans, lines of credit, merchant fund advances and many more. The best option for a bad credit loan would be to apply for an unsecured payday loan, where the interest is fixed, and it is not against any assets your business may own. 

Secured Loan 

If your business has been up and running for at least 9 months and involves tangible assets, you may be eligible for a secured loan. You can take out a loan against property that is owned by your business as collateral. These can be in the form of technology, vehicles, machines, or buildings. This type of loan offers a lower interest rate, as there is a low risk for the lending institution and they have collateral secured on your end, in the event you are unable to continue loan repayment. 

Government Grants 

You may be able to apply and get a loan from the government. The government has initiatives in place to promote small businesses and help them out with funding. Based on the program, these can either be grants that do not require repayment or loans with a very flexible repayment model; it depends on your business model and eligibility. Bad credit will not be a deciding factor, rather it will be based on your business plan and projected revenues. The grants can come in many ways, whether it is in cash form or equipment needed for your business. The downside to this type of funding is that the application process is very long and complicated. 

Equity Crowdfunding

If you are still starting and your business is just about to launch or needs the funding to launch, equity crowdfunding platforms can be a great option. These platforms source money from many different lenders with varying contributions. They help raise capital for small businesses and start-ups that need the funding to start. There is no monthly payment or repayment of the amount, however, lenders who help you raise money will have a small equity in your up and coming business. This option is great only if people like your business plan and believe in its business viability. 

Invoice Finance Loan

For some businesses, applying for an invoice financing loan can be a good option. Lenders can overlook bad credit if you have secured future invoices that are to be collected. This means your business is operating well and will be bringing in revenue. Lenders will approve a loan against the debt you will collect from the market against invoices that have already been issued out. 

Co-Signer Loan

Most institutions, banks or online lenders, will approve a loan amount of up to £15,000 if you can get a guarantor to co-sign the loan. So, bad credit aside, if you can have a friend or family member take on the responsibility of applying for a loan with you, then you will most likely secure the loan. You can apply through your bank or through online lenders who make the process even easier. However, this will be a high liability on your co-signer as they will be the ones to make the repayments if you are unable to continue making them. 

Being able to secure a business loan can make all of the difference to your future success and get you through tight spots. However, it can be difficult to get funding with a bad credit score through traditional means. Look into the suggested options for more flexible options and see if any of them may fit your needs. Many online brokers can loan you money even if your credit isn’t great. Just make sure to do your research and read all of the terms and agreements thoroughly before committing. Don’t let bad credit discourage you or stop you from pursuing your business goals. 

Annika Bansal

Annika "The Chick Geek" is the founder of Small Business Sense shares small business ideas, tips and resources for independent Entrepreneurs and Small Business owners.