Bad Credit Business Loans

Even if your business has bad credit, you may still be able to access funding. Bad credit business loans can let you access the credit your business needs.

Finding the best bad credit loan for your business

By Laura Rettie, Personal Finance Journalist.

Laura Rettie

If your business has a bad credit history, you may still be able to access funding. Read our guide to find out more about business loans for poor credit.

What are bad credit business loans?

It’s common for businesses to need funding for various reasons, whether it’s to improve cash flow or financing for new equipment. Having an adverse credit history can feel like a real problem for a business.

To lenders, having a bad credit history means that your business is at higher risk of defaulting on a loan. For this reason, many lenders will turn away businesses with poor credit, but it's still possible to access finance.

Bad credit business loans allow business owners to get access to the funding they need, despite their bad credit history. Bad credit lenders will look for ways to work around the higher risk that businesses with an adverse credit history pose, whether that’s by securing the loan against business premises or offering a higher interest rate.

Can I get a business loan with bad credit?

Getting a business loan with bad credit is possible. You won’t get offered the best interest rates, and you may need to look at a form of secured lending because lenders will want to protect themselves from the higher risk of lending to a business with a bad credit history.

What is considered bad credit for a business?

Business credit reports are very similar to personal credit reports, but the information held is about the business, not an individual. Business credit scores are what many lenders will use to determine a business’s creditworthiness and judge how much of a risk lending to them would pose.

There are several credit reference agencies (CRAs) in the UK that will collect a business's information, each with its own scoring system.

Here’s a list of the top 5 CRAs for business credit reports in the UK:

Dun & Bradstreet

The D&B score is made up of two parts, a score for the financial strength of a business and a risk indicator.

The financial strength indicator shows the tangible net worth of a business. The risk indicator will show the lender's risk of lending to the company. It ranges from 1 - 4, with 1 being the lowest risk and 4 being the highest.


Experian is one of the most popular CRAs used by many lenders. Their business credit scores range from 0 to 100; the higher the score, the better.


Equifax’s credit risk score ranges from 101 - 992; once again, a higher score shows lower risk.

Credit Passport

Credit passport’s score has two elements, the first is a letter score, ranging from E to A++, and the second is a percentage score of the probability of default.


Creditsafe’s business credit scores also range between 1-100, where the lower the credit score, the higher the risk.

What affects your business’s credit score?

Several factors can impact your business’s credit score, including:

  • Making multiple credit applications in a short period.
  • Exceeding approved credit limits, on products such as overdrafts or credit cards.
  • Missing or making late payments.
  • Not filing your business accounts on time.
  • How long your business has been operating.

This is not an exhaustive list, but these are some of the most common reasons a business might have a low credit score.

How can I improve my business’s credit score?

Unfortunately, improving your business’s credit score won’t happen overnight, but there are a few ways to improve your score over time.

  1. Make sure all your details are correct - Check that all the details on your business credit report are accurate; if you spot any errors, you should contact the CRA to correct them.
  2. Make payments on time - Repaying debts and paying invoices promptly is one of the most important things you can do to maintain a good credit rating. Making late payments or missing them completely will negatively affect your business’s credit score and the likelihood of gaining access to credit.
  3. Filing your business accounts on time - CRAs and lenders will look at Companies House information when assessing your credit worthiness. Making sure your business accounts and tax returns are filed before any deadlines can help boost your business credit score.
  4. Stay within business’s credit limits - exceeding your credit limits is a bad sign for lenders; using your credit sensibly will improve your business credit score but exceeding your limits will make it seem like your business relies too heavily on credit.
  5. Limit the number of credit applications your business makes - every time you make a credit application, the lender performs a “hard credit search”. Every time this is done, it will leave a mark on your business’s credit file. Having multiple hard searches in a short time will make lenders think you’re desperate for credit and will make your business appear higher risk to lend to.

What type of business loans are available with poor credit?

Here are some of the most common types of bad credit business loans.

Secured business loans

Similar to personal secured loans, a secured business loan is secured against high-value assets, such as business equipment or property, also known as collateral. Secured loans help to lower the risk to the lender but will mean that if your business fails to repay the loan, the lender has the right to recover the money by seizing your assets.

Guarantor business loans

A guarantor business loan requires a third party to cosign the loan. By cosigning the loan, this third party agrees to repay the loan if your business fails to do so. This can be a good option for companies with bad credit; however, finding a guarantor can sometimes prove difficult.

Merchant cash advance

A merchant cash advance is an excellent option for businesses that handle a lot of card transactions. With merchant cash advances, the lender will take a pre-agreed percentage of card transactions as payment for the loan.

Invoice finance

Invoice finance is a type of business loan where the money you borrow is secured against your business's unpaid invoices. Providers will offer to loan you a percentage of the business’s unpaid invoices, which can help improve cash flow.

Unsecured business loans

Some unsecured business loans are available to businesses with bad credit, but they are considered high risk to lenders. This will usually impact either the amount your business is able to borrow, the interest rate you’ll have to pay or the length of term you’re able to borrow for.

Are there any alternatives to poor credit business loans?

When trying to access business funding with bad credit, business loans are not the best option for everyone. Other types of credit available may be more suitable for your business.

It’s crucial to weigh up all your options before applying for any form of credit to ensure you find the right solution for your business.

Business credit cards

Business credit cards work similarly to personal credit cards; they are generally used to borrow smaller amounts to cover everyday business expenses or to purchase larger items needed for the business.

If your business only needs to borrow a small amount or is looking for a way to finance a larger item, a business credit card may be a good option. There are credit cards available for businesses with bad credit, although, similarly to business loans, you’re less likely to be offered the best deals.


There's a range of crowdfunding options available, and if you’re looking for an alternative way to finance your business, a crowdfunding platform may be a viable option. Before choosing crowdfunding as the way forward, it’s important to do your research and consider any risks involved.

Business grants

A number of business grants are available, provided by both the government and private organisations. The benefit of business grants is that they’re not a debt, and if you succeed in securing a business grant, you don’t have to pay it back.

However, business grants can have very specific criteria and applying can be time-consuming.

What are the advantages and disadvantages of business loans for bad credit?

There are pros and cons to applying for any form of credit, but it’s essential to consider the advantages and disadvantages in order to make an informed decision.


  • Finance business equipment
  • Can help to rebuild your business’s credit score
  • Improve company cash flow
  • Can help you to grow your business


  • High interest rates
  • Loss of assets
  • Missed or late payments can negatively impact your business’s credit score

The information provided does not constitute financial advice, it’s always important to do your own research to ensure a financial product is right for your circumstances. If you’re unsure you should contact an independent financial advisor.

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Frequently asked questions

What can a bad credit business loan be used for?

A bad credit business loan can be used for many things, including helping free up cash flow, growing your business, or purchasing new equipment.

Will I need to provide security for a bad credit business loan?

There’s a range of bad credit business loans that will require some form of security, such as invoice financing or secured business loans. However, it can be possible for businesses with bad credit to get an unsecured loan, but the interest rates may be high, and you might not be able to borrow over a long period.

Will I need to give a personal guarantee for a bad credit business loan?

There will be bad credit business loans available that don’t require a personal guarantee, but some will. Each lender has its own criteria when it comes to making lending decisions.

Will my personal credit score affect my business getting a bad credit loan?

There may be some instances where a lender will look at your personal credit history before giving your business a loan, for example, if your business is new and the lender has nothing else to base your business creditworthiness on.

Lenders should tell you before they perform a hard credit check on you, so make sure you read the eligibility criteria and terms before applying for a bad credit business loan.