If your business has a bad credit rating, you may not get the lowest and cheapest rate for business loans. This is because lenders will think it's risky to lend to you.

If you're looking for a personal loan, lenders will look at your personal credit score. With a business loan, lenders are looking at your business credit score.

If your business loan application was rejected because of bad credit, there is still a way to get a loan. These are classified as Bad Credit Business Loans. To get one you will need to know:

  1. Your business credit score. A rejected business loan application doesn't always mean a bad credit score, but each lender will have its own criteria. Knowing your business credit score might help you find one more likely to lend to you

  2. Why you want to borrow. Decide why you are applying for a loan and what you want to use it for because there may be other options. These include crowdfunding platforms like CrowdCube or business grants for small businesses

  3. How much you want it for. The lenders in our comparison offer bad credit business loans from 1,000 up to 500,000

  4. How long you want it. Lenders offer terms that last for between three months and five years

  5. What kind of finance works best. Find out what other types of business finance you could consider.

If your business has a poor credit history it can be harder to get the finance you need. But some lenders are more likely to consider lending to businesses with bad credit.

Check the criteria before you apply for a loan, as they vary from one lender to another. Some will need to know your minimum annual turnover and how long you've been trading before any loans are approved.

If your business doesn't meet any of their criteria, strike that lender off your list and look elsewhere. If you keep trying, it could damage your credit score.

Online-only lenders may be more accessible to businesses with bad credit. This is because traditional lenders like banks might have more requirements.

Once you find some potential lenders you should check the representative Annual Percentage Rate (APR) and the length of borrowing term. These will affect the total cost of your loan.

This comparison shows you each lender's representative APR, which is the interest rate they must offer to at least 51% of applicants.

Here is a guide on how business loans work.

What affects your credit score?

Each lender will have their own criteria on what is a good credit score. Here are some factors that can affect it:

  • Late or missed payments

  • Existing debt

  • County Court Judgments (CCJs) or bankruptcy

  • Making multiple applications in a short space of time.

A Credit Reference Agency (CRA) generates your business credit score to indicate how reliable you've been with borrowing. The three CRAs in the UK are Experian, Exquifax and Callcredit.

Lenders will use this information to decide if you're eligible for a loan and set terms if your application is successful. A higher credit score increases your chance of being offered a cheaper loan.

Here is why your credit score matters.

How can I improve my credit score?

Choose one of the CRAs listed above and check your credit rating. Once you have access to that information you should confirm the points below.

  • The information is correct and up-to-date. If not, you can ask the agency to amend it

  • You can access credit options like a business credit card and use it to build up your credit rating

  • You have your business name on your business bank account

  • You are paying bills on time and this shows on your statements and cash flow

  • You are filing your accounts on time

  • Close any old accounts if you no longer need them.

If you take out a bad credit business loan and repay it on time (without missing any payments) this can improve your credit record. If you miss or are late with payments, this could cause further damage.

What happens if there is a CCJ against the business?

If you get a CCJ, it means your creditors have won a court case against you for money. The court ruling means you have to pay any outstanding debt and will decide how you pay. Unless you pay the full amount within a month, a CCJ will stay on your business credit file for six years.

Having a CCJ on your file will lower your business credit score and appear on your records. This means that it will reflect badly on your business and affect a lender's decision to accept your application.

If you think there has been a mistake, you should contact the CRA and see if you can have the CCJ removed.

Finding business start-up loans for bad credit

Lenders look at records to see how you have handled borrowing in the past. They will have their own internal credit score that applicants must meet to get a loan.

If you are a new business without a borrowing history, you may have to start with a bad credit business loan to build up a positive history.

Consider a business start-up loan. These have specific borrowing rates for businesses that are less than two years old.
Here is our comparison table of business loans for start-ups.

Lenders may consider the financial health of any partners in your business. If they have good credit and a good reputation, this could positively impact your application.

Finding small business loans for bad credit

If you are running a small business, you won't need a large turnover to get a business loan but you will need to meet the lender's criteria.

For example, your business must not employ more than 50 people or have an annual turnover of more than 150,000.

If you take out a small business loan when your business has bad credit, the repayments can help improve your credit score. It means you could get a better borrowing rate in the future.

Lenders will consider the current financial health of your business so you will have supply up-to-date accounts. The more proof you can provide of your business' finances, the better chance you have of getting a lower rate.

Here is what you need to check when comparing the cost of a small business loan:

  • Amount

  • Representative Annual Percentage Rate (APR)

  • Borrowing term

Here is our comparison table of small business loans.

Finding business loans for sole traders with bad credit

If you're self-employed and the sole owner of your business, you are a sole trader. This means you're personally responsible for your business' finances, including any borrowing.

If you need a cash injection into your business, lenders will look at your personal credit history to decide whether to lend to you.

Before you apply you should check the financial health of your personal finances. It's important to check that you:

  • Are on top of any credit card repayments or loan agreements

  • Avoid repeatedly maxing out your credit card. If you regularly use it all, it can look like you are struggling to handle your finances

  • Address any areas on your credit score that might be contributing to a negative rating.

Some lenders will prioritise sole traders and small businesses but others will only lend to businesses with a higher turnover. Look at individual requirements before applying.

Short-term vs long-term bad credit business loans

The primary difference between long-term and short-term loans is the repayment length. There are other key differences that will affect what is best for you.

A short-term business loan is a good option if you need cash straight away and some lenders will transfer the money to your account within 24 hours. The downside is that your repayments are likely to be higher than borrowing the same amount over a longer term.

A long-term business loan might be a good option to manage your immediate cash flow. It offers lower monthly repayments, but you will pay interest for longer with this type of loan.

Short-term loans = higher interest rates but lower interest overall

Long-term loans = lower interest rates but higher interest overall

Are there bad credit loan alternatives?

If you need to borrow a small amount, you could consider a business credit card to spread your payments. But you will still pay interest on what you spend. An agreed overdraft will also let you cover your bills and expenses in cash with very little interest.

Did you find what you needed? If not,
here is our guide on managing business finances.

Bad credit business loan FAQs


Can I borrow if my business has bad credit?


Yes, some lenders will consider your application if you have had credit issues in the past, but it may be more expensive.


What does APR mean?


It means Annual Percentage Rate and it is the annual interest cost of the business loan including fees.


Do I need a guarantor if I have bad credit?


Not all bad credit business loans require a guarantor but some do, so check this before you apply.


How can I improve my business credit score?


Check your credit record is accurate and up to date, and ensure you pay your creditors on time.


Can I get a business loan with no credit check?


Some lenders advertise no credit check business loans but they may be more expensive.

About our comparison


Who do we include in this comparison?


We include business loans available directly from lenders and through brokers on our panel. Here is more information about how our website works.


How do we make money from our comparison?


We have commercial agreements with some of the companies in this comparison and get paid commission if we help you take out one of their products or services. Find out more here.

You do not pay any extra and the deal you get is not affected.