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Can you get a Business Loan with Bad Credit?

Having bad credit certainly can make it difficult for you to acquire a business loan, particularly from a traditional lenders and many business owners often fear that it is impossible to get a business loan with bad credit.

Banks, for instance, are known to have rigid guidelines when it comes to funding businesses with little or bad credit. They often decide against lending to individuals and SMEs with bad credit as the risk is deemed too high.

However, an unwillingness from the banks to give you a business loan does not always equate to a lack of funding and a dead end for your business. There are alternative financial lenders, that are prepared to work with businesses in turnaround situations, to ensure that SMEs get access to the working capital they need to thrive.


How Traditional Lenders Evaluate Businesses?

It would be remiss of us to ignore the fact that credit history is a major consideration for the lending industry. Additionally, the majority of alternative lenders will also refer heavily to your credit score when deciding whether to lend to you or not.

Most lenders will not consider giving loans to businesses with bad credit.

Some lenders make credit history the only basis on which they decide to grant or deny business loans and even if they find the business to be a viable venture with a tremendous potential for growth, they may still turn down the loan application on the grounds of poor credit rating.  

As more and more businesses enter the market every day, banks cannot be relied upon entirely to fund small businesses – those of which form the backbone of the British economy. It was the inability of conventional lenders to support growing businesses which led to the meteoric rise of the alternative finance industry.


How Alternative Finance Providers Evaluate Businesses?

With traditional lenders choosing a more black and white approach to due diligence, it is natural for business owners with bad credit to feel dubious about their prospects of acquiring finance.

At Nucleus Commercial Finance, we believe that credit score is important, but it should not be the sole criteria on which a business loan application should be reviewed. We primarily analyse the ability of a business to repay the loans that we provide. Our expert team are specialists in structuring facilities that solve our clients problems. We understand that most businesses do not have a straightforward journey and are here to support you.

Most alternative finance providers evaluate the following aspects about a business:

  • Business Plan or Strategy
  • Total Revenue
  • Profits Earned
  • Gross Monthly Sales
  • Potential to Grow

Our Property Finance is a secured loan, allowing you to borrow between £25,000 and £20m, secured against residential or commercial property. This product is most commonly used to consolidate debt, as start up capital or often in a business turnaround scenario where there may be a history of bad debt for one or more directors. 


Lending Options

Recently, alternative finance providers have witnessed a surge in the number of business loan applications, not only from businesses with bad credit, but also from those businesses which have good credit but who are looking for funding solutions that are quick, reliable and viable for them as a business.  

Following are some forms of credit which businesses with or without bad credit can apply for:

An Unsecured Business Loan

As the name suggests, an unsecured business loan can be accessed without having to secure it against any building, stock or asset. Mostly companies that do not have any collateral to offer or have previously faced difficulties in acquiring business loans from banks can apply for such loans. 

Bad Credit Loans

Businesses with bad credit are often sceptical about their chances of receiving commercial finance. Even though there are several types of loans which a business with bad credit can benefit from, certain lenders were quick to capitalise on this fear and started offering ‘bad credit loans’ to businesses with extremely poor credit scores.

Friendly Loans

Most start ups try to secure finance for their business from their friends and family as they are not required to pay heavy interest rates or provide collateral should they default on the payments. This is often a good option for SMEs as their bad credit is not taken into consideration to acquire this type of loan, but it can put a strain on relationships with loved ones.

Business Cash Advance

Business cash advance is an alternative finance solution which can be accessed by businesses that take payments in the form of card transactions. The amount of money that can be lent via business cash advance depends on the monthly volume of card payments. The business receives a lump sum of cash and the finance provider receives a percentage share of the payments received by the business thereafter. The advance is based on future card volumes and although the credit score of the owner will be taken in to account it is not the primary deciding factor.

Asset Based Lending

Asset Based Lending is a suitable option for businesses which have assets to offer as collateral. Assets which can be used as collateral include equipment, machinery, technology and vehicles. As these loans are typically secured by an asset, they are considered to be less of a risk compared to other types of unsecured loans.

Invoice Finance

Businesses often run into a cash flow crisis due to the late payment of invoices. Such businesses can give their cash flow a boost by using their invoices to gain access to money that is otherwise tied up in unpaid invoices.


At Nucleus, we believe that with the right financial product and a well thought out business plan, any small business with potential can not only meet its growth targets, but surpass them.