Beware of scams

We are aware of scams coming from email and social media where people try to impersonate us. We will never ask you for money or your bank details. Learn more about what to look out for and how to protect yourself.

Can I get a business loan with bad credit?

Having bad credit can harm your ability to get a business loan, But there are ways to repair your bad credit and make it easier to get loans or other finance in the future.

Having bad credit can make it more difficult to get a business loan from mainstream lenders such as banks.

Fortunately, there are ways to repair your bad credit opens in new window – and improve your credit score – to make it easier to obtain finance in the future.


Making business finance work for you

Starting a business doesn’t come with a set of instructions.

We know that understanding the many different types of financial product in the marketplace can be difficult.

Our Making business finance work for you guide is designed to help you make an informed choice about accessing the right type of finance for you and your business.

Download your free copy


Why your business might have bad credit

Having bad credit means that your business’s credit score is low enough that lenders see a risk in lending you money opens in new window.

Your credit score (also called your credit rating) is a number that indicates how creditworthy your business is, as guided by its credit history.

The higher your score, the greater the chance you’ll be approved for a business loan opens in new window.

You might also benefit from better rates, higher credit limits, and a wider range of options.


Reasons for bad credit

A lender might see your business as having bad credit if, for example, you’ve:



Securing a loan for your business might also be difficult if your senior managers:




What happens when you apply for credit

Whenever your business applies for any kind of credit – a loan, a credit card, a mortgage or vehicle finance, for example – the lender requests your credit report from a credit reference agency (CRA).

CRAs are organisations that maintain information about the credit you’ve held and/or applied for over time.

Lenders use that information to decide whether to grant you credit and, if so, how much and on what terms.

In the UK, the three main CRAs are Experian opens in new window, TransUnion, opens in new window and Equifax opens in new window.

They collect data on your business’s credit history and put it into a credit report that they update every month and hold for six years.

They look at public data about your company to determine its net worth and whether it holds a healthy amount of cash opens in new window.

The CRAs have numerical scales (for example, 0–999 or 0–700) that they use to give your business a credit score.

They typically group scores into categories such as excellent, good, fair, poor and very poor.


How to find your credit score

Before you apply for credit, first check your credit score with all three credit reference agencies.

If your business credit score is poor, it’s vital you know about it.

Otherwise, you could face disappointment if you apply for credit and are turned down.

This could leave you unable to:



Checking your credit score is usually free of charge, although you may have to pay to access your full credit report, as explained below.


  • Experian’s My Business Profile opens in new window includes a free three-month trial, after which you pay a monthly fee of £24.99 (plus VAT) to access your full business credit report and credit score.
  • Equifax offers a free 30-day trial opens in new window, after which you pay £7.95 per month to see your full credit report.
  • There are other service providers, such as checkmyfile opens in new window, which offers a multi-agency credit report. Its report includes information from all three UK CRAs and is free to use for 30 days, then £14.99 a month.


For more information about checking credit scores and reports, visit the Money Advice Service opens in new window website.


Loans for businesses with bad credit

If your business has a bad credit score, you may struggle to borrow money from traditional lenders such as banks opens in new window.

If a lender does grant you credit, it may give you less than you want and/or charge more in fees and interest.

Instead, you may need to look for a bad credit business loan.

A number of lenders now offer these loans, especially to businesses that have a good turnover or valuable assets.

The terms of these loans, and their eligibility criteria, do vary.

Also keep in mind that the interest and fees can be significantly greater than a standard loan.

That said, they can be a useful option if your business (or you personally) has a poor credit score.


How to get a bad credit business loan

If you choose to go for a bad credit business loan, identify the best options available to you and find out exactly how much you’ll have to repay.

When you know the annual percentage rate (APR) of each bad credit business loan you’re offered, you can properly compare the costs of borrowing.

Factor in all costs, fees and interest.

Importantly, before you apply for a bad credit business loan, you should seek advice from an accountant opens in new window.

They will be able to give you a full idea of the cost of the loan and the impact it will have on your cashflow.

Some bad credit business loans require borrowers to have a guarantor.

Others don’t, but these are typically more expensive.

Having a good turnover or valuable business assets can make it easier to get a bad credit business loan.


Other sources of funding for businesses with bad credit

If your business has bad credit and isn’t able to get a business loan, there are other funding options available.


Start Up Loan

If you’re starting a business – which means you have no prior trading history – you may be able to get a Start Up Loan opens in new window.

If you apply, you will undergo a credit check opens in new window.

You won’t be eligible for a Start Up Loan if you:



Secured loan

If your business owns assets such as commercial property, vehicles, machinery, equipment or technology, you can obtain a business loan secured against these.

Secured loans are often cheaper than other bad credit business loans as there is less risk for the lender.


Guarantor loan

In most cases, a guarantor is a family member or friend who is happy to assume responsibility for your loan should you be unable to make the repayments.

With the support of a guarantor, you may be able to borrow up to £10,000.


Government grants

The Government helps new and small businesses with funding without any expectation of repayment so bad credit isn’t a problem.

Government grants opens in new window come in many forms, from cash to free equipment.

The Government’s website GOV.UK opens in new window provides details of the grants currently available to small businesses.

Keep in mind that applying for a grant can be a time-consuming and complex process, and there may be restrictions on how you can use the money.


Business cash advance

A lender may be prepared to lend you money on the expectation that repayment comes directly from future sales opens in new window.

As this effectively sells future sales to the lender at a discount, a bad credit score won’t count against you as it would with a traditional loan.


Equity crowdfunding

If you’re a start-up or small business looking for working capital, one option is to raise money from a number of investors opens in new window who each contribute relatively small amounts.

This is known as equity crowdfunding.

Investors contribute knowing their money won’t likely be repaid.

However, as investors, they do have equity in your business.

For other sources of finance aimed at businesses with credit issues, visit the Alternative Business Funding opens in new window website.


Learn with Start Up Loans and help get your business off the ground

Thinking of starting a business? Check out our free online courses in partnership with the Open University on being an entrepreneur.

Our free  Learn with Start Up Loans courses opens in new window include:

Plus free courses on finance and accounting, project management, and leadership.


Reference to any organisation, business and event on this page does not constitute an endorsement or recommendation from the British Business Bank or its subsidiaries or the UK Government. Whilst we make reasonable efforts to keep the information on this page up to date, we do not guarantee or warrant (implied or otherwise) that it is current, accurate or complete. The information is intended for general information purposes only and does not take into account your personal situation, nor does it constitute legal, financial, tax or other professional advice. You should always consider whether the information is applicable to your particular circumstances and, where appropriate, seek professional or specialist advice or support.

Feeling inspired?