With a poor credit rating, your chances of getting a small business loan from a bank (which is already low for most Australian SMEs) are pretty much zero.
High street banks are extremely risk averse and have strict lending criteria, which very few “small” businesses meet.
As well as assessing factors like the amount of collateral you have to offer, how much capital you have in your business and your capacity to service your loan, banks will look at your character.
This includes factors like your;
- Trading history
- Reputation with suppliers and customers
- Position within your market, and – crucially –
- The credit history of you and your business.
A poor credit score will disqualify you for most types of bank business finance.
Rather than damage your credit record further with a rejected application for finance, you could turn instead to the fintech finance market (alternative online lenders).
Alternative sources of business finance
There are scores of lenders that can offer unsecured business loans to Australian businesses. An unsecured business loan is a loan where you do not have to provide any security (assets) to get the loan.
Each of these lenders will have their own risk appetite and lending criteria, of course – but with so many to choose from there’s a much greater chance that you’ll be able to access the business funding you need.
You’ll even find that there are plenty of lenders who specialise in loans to businesses, or businesses owners, with a bad credit rating. You may still qualify for a loan as long as your business is performing well and meets the other important lending criteria – the most important of which is your capacity to make your repayments on your loan.
Bad credit business loans with guaranteed approval in Australia do not exist, however, if your business is performing well, there is a strong chance your personal credit history will be overlooked.
It’s absolutely crucial that you do your research, to make sure that you’re planning to deal with a reputable lender who will offer you fair terms and reasonable interest rates. Even then, you can definitely expect to pay more for your poor credit business loan than you would for a standard unsecured business loan.
Why you’ll likely pay more for a bad credit business loan
The interest your lender charges for your business loan not only enables them to make a profit, it also compensates them for the risk involved in lending to you.
Should your business be late with repayments – or worse, be completely unable to repay your loan – the lender will lose money. If you or your business have a history of defaulting on your financial obligations many lenders (including the high-street banks) simply won’t take the risk that you will do so again. Those lenders who will take on the risk, expect to reap high enough returns to make that risk worthwhile.