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Bad credit business loans
Your credit history doesn’t have to lead to a dead end. There are a number of business loans you can apply for even with bad credit.
If you're looking for a business loan, you may be concerned that your credit score will get in the way. While high street banks may not approve your application if you have bad credit, there are other loans to consider. These include secured business loans, invoice factoring and business loans from non-bank lenders.
What you need to know
Credit scores differ: Business credit scores are separate from personal credit scores, and both can impact your ability to secure a loan.
Loan options exist: Even with bad credit, you can explore options like secured loans, invoice financing, and merchant cash advances, though they often come with higher rates.
Watch out for costs: Pay close attention to interest rates, fees, and loan terms to avoid costly surprises and ensure the loan meets your business needs.
Bad credit business loan options
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What is a business credit score and can I get a business loan with bad credit?
Your business credit score is not the same as your personal credit score. Your business credit score will determine whether your business is creditworthy. It will determine your ability to get a loan. Credit rating agencies have their own methods for calculating your score, so it may differ between them. But generally speaking, if you have a low score, lenders may consider your business risky and may not approve your application.
While it may be more difficult to get approved for a business loan, it is not impossible. There are lenders who consider lending to bad credit applicants. We've listed them below.
What's the difference between a personal and business credit score?
The idea behind a credit report, whether business or personal, is to give lenders an indication of how risky the borrower is. Both your business and personal credit scores will play a role in your ability to get a loan. But they are not the same thing.
The main difference between the two is that your personal credit file will contain information on your individual consumer credit activities. In contrast, your business credit file will contain information about your commercial credit activities. Your business credit score does not impact your personal credit score, and vice versa.
Personal credit file. Your consumer credit file will include your personal details, your credit accounts, any negative listings such as defaults or missed payments. It will also include any consumer credit inquiries, as well as information on public record such as bankruptcies and court judgements. It will also list whether you've operated a business before.
Business credit file. Your business credit file will contain company details, including information on company structure and current shareholders. It will also include registered defaults, potential loan inquiries or any external administration that may be registered against your business. Additionally, any public record information, like any legal matters or action taken against your company by Australian Prudential Regulation Authority (APRA), will be included. Any information the Personal Property Security Register (PPSR) has on your company's possessions will also be on your credit file.
Expert overview: 3 things you should know when getting a business loan with bad credit
Lenders consider the financial standing of the business itself, as well as its directors. Having bad credit, therefore, won't necessarily prevent you from getting a loan.
If you have bad credit, it may be more difficult to get finance from high street banks. But there are a number of smaller lenders that will consider your application.
Bolster your application with a business plan, detailed financials and financial forecasts. This can help increase your chances of getting a loan.
How can I get a business loan with bad credit?
Traditional banks may be tough on businesses with bad credit. But there are alternative financial lenders with relaxed criteria, and they are open to lending to bad credit businesses. Alternatively, you could also opt for a secured loan or a different type of loan, such as invoice factoring.
Secured bad credit business loans
If you apply for a secured loan, using an asset as collateral, the lender may consider lending to you as being less risky. Here's what you need to keep in mind when applying for a secured business loan:
Assets such as business equipment, vehicles, property and funds in savings accounts can be used as collateral.
These loans are generally granted by banks. Terms and conditions differ, so it's a good idea to shop around for a loan that suits your budget.
You could receive more competitive interest rates with a secured loan.
But, if you can't make your repayments, the lender will sell your assets to cover what you owe.
Alternative lenders
A number of alternative financial lenders have entered the market and are willing to cater to businesses with less-than-perfect credit or no security. These alternative lenders include peer-to-peer lenders and non-bank lenders. Here's what you need to keep in mind:
Alternative lenders offer a small portfolio of loan products.
Bad credit isn't a determining factor. You need to demonstrate that your business has the capacity to repay the loan.
Interest rates for bad credit borrowers may be higher. Some lenders may opt for risk-based lending or personalised rates.
Loan terms may be shorter. Responsible borrowers may be rewarded with better rates the next time they apply for a loan.
You may not have to offer security for the loan.
The application is quick, often with same-day approval.
Invoice financing
If you have outstanding invoices that are tying up your cash flow, you could consider invoice financing. This is a type of invoice-based lending, where you take a loan against your unpaid invoices. You can convert some or all of your unpaid invoices into funds. This option is becoming popular as:
Your bad credit history doesn't play a role
No real estate is required as collateral
You will receive a certain percentage of the invoice, usually 80 to 90%; the remaining will be transferred to you once the customer pays, minus the company's fee
Turnaround times can be fast
You can enter into an ongoing arrangement with the financing company
Here's what you need to keep in mind when comparing loans:
Does the loan meet my needs? You need to take into consideration why you need the loan. Is it for long-term investment, to upgrade equipment or to overcome cash flow shortages? Take the specific needs of your business into consideration and look for a loan suitable for those needs.
Can I afford the loan? What's the interest and comparison rate? The latter will give you an indication of the true cost of the loan. It includes interest and fees that come with the loan. You can use a business loan calculator to help you determine whether you can afford it. It's important to apply for a loan you can afford. If lenders feel you can't, they will reject your application. Additionally, getting into debt you can't afford will lead to long-term financial difficulties.
What is the loan term? How long do you have to repay the loan? It's important to take into account the loan term as this will determine how much interest you'll be paying over the years. This will add to the cost of the loan.
What is the eligibility criteria? Bad credit loans have a more flexible criteria, but you will still need to meet the lender's minimum requirements. Check the minimum monthly turnover and minimum operating period required. Only apply for a loan if you tick all the boxes.
What are the loan features? Does the loan offer features you would find useful? For instance, if you're a start-up, you may be unsure of your cash flow. If so, you may want the ability to top-up your loan. If you're taking a loan to buy stock that will be sold in the next 6 weeks, a loan with terms longer than a year may be unsuitable.
Are the repayments flexible? Do the repayment terms suit your business's cash flow? Some lenders may allow you to repay the loan daily, weekly, fortnightly or monthly. Does the loan give you the flexibility you need to manage your business?
How can I improve my business credit score?
You should first get your hands on a copy of your business credit report. Take a look at all your credit accounts and ensure the information is accurate. You should inform the credit reporting agency if there are any errors. This can include basic information like your name or address, or the amount of debt listed.
To improve your score, you should:
Make payments on time. Pay all your bills on time, including electricity, gas, rent and mortgage payments.
Reduce your credit card limit. The bigger the limit, the bigger the liability to lenders.
Pay more than the minimum on your credit card. Pay the amount in full, if possible. Paying off debt on time can help improve your score.
Limit how many credit applications you make. Applying for many loans in a short period of time will result in many hard credit checks. This can impact your credit score greatly. Select one loan and apply for it.
If your application got rejected, wait for 3 to 6 months before applying again. You can work on improving your credit score in the meantime.
What should I be aware of before applying for a bad credit business loan?
Disreputable money lenders and loan sharks. Unfortunately, there are disreputable lenders that offer what appear to be attractive rates or financing for bad credit applicants. You should be wary of any offer that seems too good to be true. It's best to check if the lender is reputable and what its history is. You should also be wary of loan sharks who charge extremely high interest from desperate borrowers. Plus, you want to check the lender's website and make sure the lender is reputable. Check if they're registered with the Australian Securities & Investments Commission (ASIC). Plus, the lender should be easy to contact.
Getting into debt you cannot afford. Check the cost of the loan and make sure you can afford it. You should be able to comfortably include your repayments in your budget. You should also avoid borrowing more than you need.
Multiple applications. Every loan application shows up on your credit report. Several applications within a short period can have a negative impact on your credit score. This can make it harder for you to get a loan in the future. Select a single loan and lender that you're eligible for and that suits your needs and apply with them.
Long-term repercussions and legal issues. Once you sign a loan agreement, you are bound to its conditions. You will have to pay the loan and all the fees. Keep in mind that for unsecured loans, the lender can initiate legal proceedings against you if you don't repay the loan. It can also report the debt to a credit reporting body like Equifax and use the services of a debt collector. With secured loans, your loan security can be repossessed by the lender if you fail to make your repayments.
How can I apply for a bad credit business loan?
🤔 Work out what type of finance you need, how much you need to borrow and what you can afford.
🔎 Start comparing lenders and loan products. Don't forget to compare interest rates, fees and eligibility criteria. You can use the comparison table above.
✅ Select a lender. Click "Go to site" to be directed to the lender's page, or "More info" if you want to read about the lender.
🖨️ Organise and prepare the required documentation. This can include proof of identification, financial statements for the last 3 years, your business plan, financial forecasts and personal financial information.
📱 Apply. Most lenders have their applications online.
Why you can trust Finder's business loan experts
You pay nothing. Finder is free to use. And you pay the same as going direct. No markups, no hidden fees. Guaranteed.
You save time. We spend 100s of hours researching business loans so you can sort the gold from the junk faster.
You compare more. Our comparison tools bring you more business loans from across the market.
Frequently asked questions
This will depend on the lender. Some new lenders may let you connect your business's accounting software to their systems. This allows the lender to make a decision within minutes. Other lenders may need your business financials to make their decision.
If you're looking for a small loan, you can use a personal loan for business purposes. It will depend on the lender. There are also bad credit personal loans. Keep in mind that these loans are designed for personal use. They won't be able to offer the flexibility and features a business might need.
This will depend on whether your business can afford it and how long you need the equipment for. If it's only for the short term, there are some lease options. These include hire purchase and finance leasing. You can read more about your options here.
Elizabeth Barry was the lead editor for Finder. She has over 10 years' experience writing about a range of topics with a focus on personal finance. You’ll find her writing and commentary in a range of publications and media including Seven News, the ABC, MSN, the Irish Times and Singapore Business Review. See full bio
Elizabeth's expertise
Elizabeth has written 228 Finder guides across topics including:
Looking to apply for a business loan? This business loan calculator lets you compare the cost of two business loans so you can see which is the one to apply for.
I have a business loan on my property. I have a for sale contract on it, once I pay out my loan, I will clear $215k. I have only been working for 3 months in my new casual job and 3 years previously in my last job, but I am having trouble on finding someone to give me a credit card. Is there any bank/credit unions that would be flexible to help me? As I need the credit card to help with my move.
Thank you.
Finder
JeniJuly 27, 2019Finder
Hi Desley,
Thank you for getting in touch with Finder.
Sorry to hear about your difficulty in finding a credit card issuer to apply with.
Since you’ve mentioned that you currently have a business loan, if your loan was with a bank, you may ask them about applying for a credit card. If you are self-employed or working part-time, you may need to provide your accountant’s information and previous Tax Assessments in order to verify your income. You may consider applying for low-income credit cards if your income is in a lower bracket. Otherwise, you may compare from our own top picks credit card.
Once you’ve chosen a particular card, you can press the ‘Go to site’ button to apply. Please make sure though to read the eligibility criteria, features, and details of the card, as well as the relevant PDS/ T&Cs of the card before making a decision and consider whether the product is right for you. You may use refer to our credit card application tips.
I hope this helps.
Thank you and have a wonderful day!
Cheers,
Jeni
IanApril 2, 2019
I owe 57000 to a bank, but i’ve lost my job if i want to get a business loan in the future am i able to
Finder
MaiApril 3, 2019Finder
Hi Ian,
Thanks for reaching out.
You can still get business loan even if you have a bad credit however, you may find it difficult to be approved as the lenders will be looking at your credit file and check your credit worthiness.
The article on this page provides guidelines on how you can go about getling a business loans despite having a bad credit. It also discusses what can be the alternatives in case you gets declined.
Hope this is helpful.
Kind Regards,
Mai
TanyaOctober 16, 2018
I would like someone to talk to about purchasing an existing business
Finder
JohnOctober 17, 2018Finder
Hi Tanya,
Thank you for leaving a question.
There are lenders and brokers that can help you buy an established business in Australia. You can use our table to help you find the right broker/lender for you. Once you have chosen a particular provider, you may then click on the “Go to site” or “Enquire now” button and you will be redirected to the provider’s website where you can proceed with the application or get in touch with their representatives for further inquiries you may have.
Before applying, please ensure that you meet all the eligibility criteria and read through the details of the needed requirements as well as the relevant Product Disclosure Statements/Terms and Conditions when comparing your options before making a decision on whether it is right for you. Hope this helps!
Cheers,
Reggie
MariaAugust 15, 2018
I want to purchase an existing business. The owner is willing to pay 10% for me to obtain a business loan. The financials show 500k for 2 locations. Will a lender consider this if I am 1 year out of a chapter 7?
Finder
JoshuaAugust 26, 2018Finder
Hi Maria,
Thanks for getting in touch with finder. I hope all is well with you. :)
There are different things that a lender assesses when determining your eligibility for a loan. Even if you are one year of out bankruptcy, you might still be able to be approved for a loan provided that you have met other requirements. The bottom line is that if you can prove to the lender that you are able to make repayments then your chance of getting approved will increase.
Of course, there are things you can do to ensure that you get a loan. For one, if you have a property which you can use as a security, then that would decrease the risk of lending you money. You may also want to present a business plan, detailed financials and financial forecasts to convince even further your lender to give you the funding.
Aside from asking traditional banks, you may also try other financial lenders who might be more lenient when approving loans.
I hope this helps. Should you have further questions, please don’t hesitate to reach us out again.
Have a wonderful day!
Cheers,
Joshua
KateMay 7, 2018
I want to purchase an existing business. I have no collateral but my parents have offered to use a property as collateral for me. Will a lender consider this? I have financials for the business for the last 5 years and it turns over 700k pa.
ArnoldMay 8, 2018
Hi Kate,
Thanks for your inquiry
Yes, there are lenders that will allow you to apply for a business loan with a property as collateral with the owner’s consent. To compare your options, please see our list of secured business loans. On the page is a secured business loans comparison tool you can use to see which lender suits you.
You can click the name of the lender or the “More info” link to be redirected to our review page and learn more about the lender’s loan offer, rates, and requirements as well as the pros and cons of using their loan service. When you are ready, you may then click on the “Go to site” button and you will be redirected to the lender’s website where you can proceed with the application or get in touch with their representatives for further inquiries you may have.
Before applying, please ensure that you meet all the eligibility criteria and read through the details of the needed requirements as well as the relevant Product Disclosure Statements/Terms and Conditions when comparing your options before making a decision on whether it is right for you. You can also contact the provider if you have specific questions.
Hope this information helps
Cheers,
Arnold
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You pay nothing. Finder is free to use. And you pay the same as going direct. No markups, no hidden fees. Guaranteed.
You save time. We spend 100s of hours researching business loans so you can sort the gold from the junk faster.
You compare more. Our comparison tools bring you more business loans from across the market.
I have a business loan on my property. I have a for sale contract on it, once I pay out my loan, I will clear $215k. I have only been working for 3 months in my new casual job and 3 years previously in my last job, but I am having trouble on finding someone to give me a credit card. Is there any bank/credit unions that would be flexible to help me? As I need the credit card to help with my move.
Thank you.
Hi Desley,
Thank you for getting in touch with Finder.
Sorry to hear about your difficulty in finding a credit card issuer to apply with.
Since you’ve mentioned that you currently have a business loan, if your loan was with a bank, you may ask them about applying for a credit card. If you are self-employed or working part-time, you may need to provide your accountant’s information and previous Tax Assessments in order to verify your income. You may consider applying for low-income credit cards if your income is in a lower bracket. Otherwise, you may compare from our own top picks credit card.
Once you’ve chosen a particular card, you can press the ‘Go to site’ button to apply. Please make sure though to read the eligibility criteria, features, and details of the card, as well as the relevant PDS/ T&Cs of the card before making a decision and consider whether the product is right for you. You may use refer to our credit card application tips.
I hope this helps.
Thank you and have a wonderful day!
Cheers,
Jeni
I owe 57000 to a bank, but i’ve lost my job if i want to get a business loan in the future am i able to
Hi Ian,
Thanks for reaching out.
You can still get business loan even if you have a bad credit however, you may find it difficult to be approved as the lenders will be looking at your credit file and check your credit worthiness.
The article on this page provides guidelines on how you can go about getling a business loans despite having a bad credit. It also discusses what can be the alternatives in case you gets declined.
Hope this is helpful.
Kind Regards,
Mai
I would like someone to talk to about purchasing an existing business
Hi Tanya,
Thank you for leaving a question.
There are lenders and brokers that can help you buy an established business in Australia. You can use our table to help you find the right broker/lender for you. Once you have chosen a particular provider, you may then click on the “Go to site” or “Enquire now” button and you will be redirected to the provider’s website where you can proceed with the application or get in touch with their representatives for further inquiries you may have.
Before applying, please ensure that you meet all the eligibility criteria and read through the details of the needed requirements as well as the relevant Product Disclosure Statements/Terms and Conditions when comparing your options before making a decision on whether it is right for you. Hope this helps!
Cheers,
Reggie
I want to purchase an existing business. The owner is willing to pay 10% for me to obtain a business loan. The financials show 500k for 2 locations. Will a lender consider this if I am 1 year out of a chapter 7?
Hi Maria,
Thanks for getting in touch with finder. I hope all is well with you. :)
There are different things that a lender assesses when determining your eligibility for a loan. Even if you are one year of out bankruptcy, you might still be able to be approved for a loan provided that you have met other requirements. The bottom line is that if you can prove to the lender that you are able to make repayments then your chance of getting approved will increase.
Of course, there are things you can do to ensure that you get a loan. For one, if you have a property which you can use as a security, then that would decrease the risk of lending you money. You may also want to present a business plan, detailed financials and financial forecasts to convince even further your lender to give you the funding.
Aside from asking traditional banks, you may also try other financial lenders who might be more lenient when approving loans.
I hope this helps. Should you have further questions, please don’t hesitate to reach us out again.
Have a wonderful day!
Cheers,
Joshua
I want to purchase an existing business. I have no collateral but my parents have offered to use a property as collateral for me. Will a lender consider this? I have financials for the business for the last 5 years and it turns over 700k pa.
Hi Kate,
Thanks for your inquiry
Yes, there are lenders that will allow you to apply for a business loan with a property as collateral with the owner’s consent. To compare your options, please see our list of secured business loans. On the page is a secured business loans comparison tool you can use to see which lender suits you.
You can click the name of the lender or the “More info” link to be redirected to our review page and learn more about the lender’s loan offer, rates, and requirements as well as the pros and cons of using their loan service. When you are ready, you may then click on the “Go to site” button and you will be redirected to the lender’s website where you can proceed with the application or get in touch with their representatives for further inquiries you may have.
Before applying, please ensure that you meet all the eligibility criteria and read through the details of the needed requirements as well as the relevant Product Disclosure Statements/Terms and Conditions when comparing your options before making a decision on whether it is right for you. You can also contact the provider if you have specific questions.
Hope this information helps
Cheers,
Arnold