3 Ways to Get a Business Loan Even With a Bad Credit Score – Our Guide

Your Business Loan

3 Ways to Get a Business Loan Even With a Bad Credit Score – Our Guide

young troubled woman using laptop at home

Regardless if you’re a private individual or a business entity, banks and big lending companies still look through your credit history. They believe that this reflects your financial performance and stability. Reviewing your credit history also helps them see how you manage your financial commitments. As such, if you have bad credit, you will have a difficult time getting approved for a business loan.

What if you badly need to get a loan for your business? Fortunately, there are alternative ways to do so, and there are other lending companies that offer business loans even with bad credit.

What does bad credit mean?

Private individuals and businesses with bad credit will have a hard time getting a loan. Lenders, especially banks and big lending companies, are strict with their application and revenue requirements. Here are some factors that indicate bad credit:

  • Default listings
  • Missed or late payments
  • Multiple credit inquiries
  • Low credit score

Alternative Ways to Get a Business Loan in Australia

Getting business loans from the banks and other big lending companies is hard, especially if you have bad credit. However, that doesn’t mean that you can’t get one. Here are some alternative ways you can get a loan even with bad credit:

1. Secured business loans

A secured business loan is a loan granted by banks exclusively for businesses, in which lenders take your assets as collateral. Typically, lenders accept collaterals in the form of residential or commercial property. Others also accept vehicles, business equipment, and funds stored in a saving account. Keep in mind that terms and conditions differ on the loan lender.

Pros

  • Bad credit is not an issue
  • Offers larger loan amounts
  • More competitive interest rates
  • Flexible payment terms

Cons

  • Lenders can sell the assets if borrowers fail to honour their repayments
  • A business should be established

2. Alternative Lenders

Alternative lending is unlike the traditional lending system because most of these alternate lenders operate online. They have lower approval and annual revenue requirements. It may be risky, so make sure to do a background check if you’re planning to get a loan with any of these lenders.

Pros

  • Bad credit is not an issue
  • Offers small, short term loans
  • Application is usually approved the same day
  • Some don’t require security
  • Some don’t charge interest rates
  • Loan terms depend on what the borrower can afford
  • Responsible borrowers get better rates for the next application of loan

Cons

  • Shorter period for repayments
  • Some assess a monthly fee

3. Accounts Receivable Finance

Accounts Receivable Finance is also known as Debtor Finance or Invoice Factoring in Australia. It is an easy and quick way for businesses to get a business loan. Business owners who have outstanding invoices get loans from these institutions. Lenders will purchase your unpaid invoices and will immediately give you your loan to a specified per cent. This type of loaning system helps businesses improve their cash flow.

Pros

  • Bad credit is not an issue
  • Quick and easy loan
  • Doesn’t require real estate collateral
  • Borrowers can finance some or all of their invoices

Cons

  • Loan terms depend on the borrowers business size and quality of invoices
  • Some lenders continually charge a fee until invoices remain unpaid

Conclusion

Having bad credit doesn’t mean that you can’t get a business loan. Some lenders are willing to approve loans for businesses regardless if they have bad credit or not. Just make sure that you are transacting with a reputable lender, and that you’re getting a loan that is right for the type and capacity of your business.

If you are planning to get a business loan in Adelaide, get in touch with us today for a free consultation. We help businesses connect with reputable and trusted lenders across Australia.

Leave a Reply

Your email address will not be published. Required fields are marked *