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April 16, 2019

How to Get Small Business Finance with a Bad Credit History

If you are thinking of starting a business, but have a low credit score, you may find it more difficult to get access to funding. This is because, for many lenders who provide business loans, one fundamental piece of eligibility criteria is having a good credit score, as it is usually indicative of your ability to successfully make loan repayments back to the creditor if they provide you with a loan.

While traditional lenders may not be as likely to provide you with a loan for your small business if you have a bad credit history, there are some avenues you can try. Here are recommended alternatives that you should definitely try if you are looking to gain funding but have bad credit.


A relatively new funding concept, crowdfunding is becoming an increasingly popular way for startups to get access to finance. Typically, you will gain funding through several different investors, and this is achieved through an online campaign through a crowdfunding website. To appeal to investors, the entrepreneur promises that they will receive ROI and profits over a designated period.

Personal Loans

Another option available to you as a small business owner is getting a microloan. Several reputable online lenders offer this option to business owners, even if you have bad credit. Typically getting access to microloans is quicker than other types of credit, but usually comes in smaller loan amounts and with interest rates that are usually higher than normal, which is something to be aware of. This type of finance can help to improve your credit score, providing you know you will be able to keep up with loan repayments.

There is the option of applying for loans, but these can usually come with interest rates that exceed 1,000%. If you can access a guarantor to co-sign a loan agreement for you, you can typically borrow between £500 and £15,000 at a more affordable rate of around 49.9%. This type of finance does not involve a credit check. However, you are advised to have a guarantor that is a homeowner and has a good credit history of maximizing your chances of approval.

Peer-to-peer Financing

Otherwise known as P2P lending, this type of financing can be an excellent way to get the cash you need for your company. Many P2P lending firms do not make having a good credit score a top priority of theirs when assessing you for a loan, so there is a reasonable chance you will be approved. These lenders usually operate online, with the application and approval process tending to be quick and efficient, meaning you will know whether you have been approved or declined for financing in a relatively short period.

Credit Cards

If you have no other option, you could look at getting a credit card, but it is best used with caution. A credit card can help you to buy items for your firm and even potentially get a cash advance too. Nevertheless, you should bear in mind that the interest rates can be higher than with other kinds of loans that are available for small businesses.

Business Grant

Business grants are available for all kinds of people in all different industries. If you have something particular to sustainability or perhaps you are a young person or female entrepreneur, there are likely to be grants available to help you, regardless of your credit history.

It could be a government grant or from a private company that is passionate about a particular cause – so it is worth researching for more information. You can also look at joining an accelerator or incubator program which includes free office space and seeding funding if you have a promising business idea.

See also our guide on building your business with a bad credit score.

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