What is a bad credit business loan?
A bad credit business loan is a form of lending designed for businesses with poor credit histories. They usually involve higher interest rates and more restrictive terms than standard business loans, and may even require collateral or a guarantor. The application process will likely involve a detailed review of your business's finances, including its revenue and borrowing history. There are specialist lenders that focus on businesses with poor credit histories, or you could consider other finance options.
Can you get a bad credit business loan?
In most cases, you will be able to get a business loan, even with a history of poor credit. However, lenders will see you as a higher risk due to your poor credit history. So, you might be offered less money, face higher interest rates and have a shorter repayment period.
If you are a sole trader, your personal credit score will be looked at when applying for a business loan. Limited companies will have their business credit score scrutinised but be prepared for lenders to look at your personal credit score too.
Depending on your circumstances, your business might have access to different types of loans, we will cover all of your business loan options in this guide.
Can you get a bad credit business loan if your business has been refused credit in the past?
If your business has been refused credit in the past, you may still be able to get a business loan. Typically, you should wait at least six months before applying for a business loan again.
When applying for a loan, lenders will carry out a hard credit check which leaves a mark on your credit file. If too many hard checks appear on your credit report, lenders might worry that you and your business are desperate for money.
What types of bad credit business loan can you get?
There are a variety of business loan options, even for those with a bad credit rating. However, not all of the following loans may be applicable depending on your financial situation.
- Merchant Cash Advance - for businesses that take regular credit and debit card payments from customers. This flexible loan agreement allows the lender to take a percentage of every sale you make to pay back the loan.
- Secured Business Loan - if you have assets, you might be eligible for a secured business loan. The loan is secured to an asset which will be seized if you fail to meet the repayments, giving the lender some security even if you have poor credit.
- Short-term Business Loan - a smaller business loan with a shorter repayment period, usually no longer than 12 months.
- Business Lines of Credit - a business line of credit allows you to access money up to a set borrowing limit. During an agreed time period, your business will be able to withdraw money when needed.
- Invoice Finance - instead of a loan, lenders will buy outstanding invoices from your business for a fee. This gives you an instant cash injection and is more lenient on businesses with bad credit.
- Microloan - if you only require a small business loan (£500 - £10,000) then a microloan could be an option. Offered by non-profit organisations for underprivileged or socially responsible businesses.
How to apply for bad credit business loans
It is important to carry out research before applying for any loan, especially if you have a history of bad credit. We recommend speaking with a financial advisor before applying and explaining your situation.
We have an in-depth article where we explain how to apply for a business loan, which explains the application process in detail. Here are some tips to improve your chances of getting accepted when applying for a business loan with poor credit:
- Check your personal and business credit score before applying
- The longer your business has been operating, the better your chances of a loan
- Make sure you have a strong business plan that demonstrates your revenue and repayment plans
- Consider securing the loan against your assets. For example, sole traders can secure a business loan to their house
- Pay off any outstanding debts before applying for a business loan
- Calculate whether you can afford to repay a loan
How to compare the best bad credit business loans
Before applying for a business loan with bad credit, you should compare different lenders to get the best deal. When comparing the best business loan you should consider the following:
- Interest rate - business loans for bad credit will have a higher interest rate than usual
- Loan amount - if you have poor credit, you might be offered less money
- Loan term - some bad credit business loans may be short-term (up to 12 months)
- Secured or unsecured business loan - if you are a sole trader, consider using your house to secure the loan as you may be offered better rates. If you are a limited company, take a look at what business assets you could secure the loan to
Next steps if your business loan is declined
The next step would be to improve your personal or business credit score, depending on whether you are a sole trader or limited company. Here’s how:
- Pay bills on time
- Clear unpaid personal and business debts
- File taxes regularly and on time
- Reassess your business plan to see if you can cut costs and increase revenue
After a few months of following the above steps, you should be in a stronger position to apply for a business loan.
£200 Pension Cashback Offer
Make a qualifying deposit or transfer a pension to our partner Interactive Investor.
- Deposit or transfer a pension of at least £20k and you could earn £200 cashback
- Terms and Fees apply, Capital at risk
- New & Existing customers opening a SIPP
- Offer ends 30th June 2026
Before starting your transfer, check you won't lose any valuable benefits (such as guaranteed annuity rates or a lower protected pension age) and find out what exit fees you might have to pay
