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Bad credit business loans & rates 

Poor credit history is not the end of the world, but it can make getting finance for your business more difficult. Luckily, there are ways to secure a business loan with bad credit.

Key points about bad credit business loans  

  • Most lenders require a credit score minimum of 400
  • Bad credit business loans have higher interest rates compared to standard business finance
  • Only specialist lenders offer bad credit finance
  • Bad credit loan terms are shorter (6 - 36 months)
  • You can use a loan security or guarantor to get better rates  

What is a bad credit business loan?  

A bad credit business loan is a short-term loan suitable for borrowers with poor credit or who may not qualify for traditional business finance. It’s similar to a standard unsecured business loan but comes with higher interest rates to reflect the added risk to the lender. Loan terms are generally shorter (6 - 36 months) and borrowing amounts are limited compared to standard small business loans or startup loans.  

Business bad poor credit rating

Can I get a business loan with bad credit? 

Yes, bad credit loans are available for business owners, sole traders and self-employed individuals who have defaulted on previous loans or have an adverse credit history. There could be several reasons your credit score isn’t satisfactory, including small dishonours, serious credit infringements, previous insolvency, or court judgments involving company directors. Most lenders require a credit score minimum of 400 for business lending. 

Business owners with no property or personal assets to secure their loan and startups with limited credit history or financials can also apply for bad credit finance. 

In Australia, bad credit business loans are typically available for: 

  • People with credit defaults
  • Businesses who’ve been previously declined for loans
  • Companies who’ve experienced insolvency
  • Discharged bankrupts
  • Business directors involved in a Part IX debt agreement
  • Business owners with an unsatisfactory credit history
  • Businesses with no financial documents
  • Adverse credit file 

Bad credit loans are not typically available from banks but from specialist subprime lenders. Before applying for bad credit business finance, you should speak to a broker about your situation.  

How do bad credit business loans work? 

Bad credit business loans have lower credit score requirements and more lenient eligibility requirements. They offset the credit risk to the lender by charging you higher interest rates and restricting your borrowing amount and term. Some lenders may require a personal guarantee from the director of the business. Aside from that, a bad credit loan is the same as any other business loan — you receive a lump sum, which you repay with interest over the term agreed in the contract. 

You can qualify for a bad credit loan as long as your business is performing well and meets the other lending criteria — the most important of which is your capacity to repay the loan. 

Please note that very few lenders (if any) offer bad credit business loans with guaranteed approval in Australia. Bad credit lenders will assess loan approvals on the merit of each case, taking into account: 

Your personal and business credit history: Your personal and business credit score and history will be assessed. They will check for late payments, collections, defaults and bankruptcies. 

Your business information: Your business trading history, revenue, and your reputation with customers and suppliers. Lenders will look at your business health more broadly. 

Character information: This may include a background check and character references to establish your trustworthiness.

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Who is eligible for a bad credit business loan? 

To be eligible for a bad credit business loan in Australia, you’ll need:   

  • An active ABN or ACN (sole traders and self-employed businesses can also qualify)
  • At least six to 12 months of trading history
  • Minimum monthly revenue of $10,000
  • To provide financial or bank statements
  • Not currently bankrupt  

How much can I borrow with a bad credit business loan? 

Your borrowing capacity will depend on your business revenue and if you have property (or business assets) to offer as collateral for the loan. You could borrow between $5,000 and $1million, based on your risk profile and ability to repay the loan (both determined by the lender). Lenders use a unique formula to determine how much you can borrow based on your business revenue and credit score.

Businesses with a lower credit score may initially only be able to borrow a limited amount but can use a bad credit loan to improve their credit score and borrow more in the future (and at a lower rate).  

small business lender formula

Interest rates on bad credit business loans 

Interest rates on bad credit business loans can range from 15% to 35%. You may get a lower rate if you provide property as collateral (security) for the loan. When assessing your credit history and business information, lenders will determine your actual rate. Be sure to research bad credit loan options from reputable online lenders who will offer you fair terms and reasonable interest rates.

How to apply for a business loan with bad credit 

Most bad credit business finance lenders have a simple online application process. You’ll need to follow similar steps as with any other application for business finance.  

1. Find the right lender 

Submitting loan applications with multiple lenders can further hurt your credit score. You can ask the lender to carry out the credit check upon approval of your loan. Do your research and read reviews to find the most suitable lender for your situation before you begin the application process.

2. Prepare a strong business case  

Your business case should indicate how much you want to borrow and how you intend to use the funds to grow or support your business. You’ll need to include financial projections to show how much extra profit you can expect to generate with the cash injection. Make sure that your projections are underpinned with realistic assumptions and that you factor in all the finance costs, including admin fees, transaction charges, etc. Lenders will look at your business and personal credit score before approving your application.

3. Submit your supporting documents 

Lenders will pay close attention to your trading history and cashflow. They will ask for documents that show you meet the lender’s criteria, including: 

  • Bank statements
  • ABN and GST registration
  • Australian Taxation Office (ATO) statement of account and notice of assessment
  • Financial records and balance sheets (prepared by an accountant)
  • Proof of revenue
  • Identification documents   

4. Get approved for a bad credit business loan  

A lending advisor may contact you to talk through your application and could ask you to supply additional information. Most online lenders will process applications fairly quickly and you could access funds within a few days.

FAQs about bad credit business loans

Does personal bad credit affect business loans?

Yes, most standard online lenders and banks will assess your personal credit score and business score when considering your loan application. However, specialist lenders place less emphasis on credit score and assess applications based on the strength of your business revenue. There are also alternative business finance options where your personal credit history is not as relevant to secure funding, including invoice financeand merchant cash advance. Businesses who can't supply conventional documentation can apply for low doc loans.

What can I use a bad credit business loan for?

You can use a bad credit business loan for any genuine business activity, including for day-to-day capital, hiring, expansions, to purchase new equipment or business assets, etc.

Do I need a deposit for a bad credit business loan?

You generally don't need a deposit to get a bad credit business loan, although it can help secure a better interest rate and increase your borrowing capacity. Alternatively, you could also offer personal assets (or property) as security for the loan or include a guarantor in your application.

Can I repay my bad credit business loan early?

Yes, you can typically repay a bad credit business loan early by making extra repayments and this may in fact help improve your credit score. However, some lenders may charge early payment penalties (break costs), so make sure you understand the terms and conditions of your contract.

Can I get a no credit check business loan?

In Australia, only a handful of lenders offer no credit check business loans or bad credit business loans with guaranteed approval. Most lenders will assess your business credit history and that of its directors when you apply for a bad credit business loan.

Can a discharged bankrupt get a business loan?

Yes, specialist subprime lenders will consider applicants who’ve been discharged from bankruptcy in the last six to 12 months. Keep in mind interest rates on the loan will be higher to compensate the lender for the risk. You may also be asked to include a guarantor or collateral (usually property) for the loan.

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