If you have bad credit, it can be harder to get business loans from traditional lenders. But there are things you can do to raise your credit score, and there are ways for businesses with bad credit to get funding.
What is a bad credit score for a business?
Your business's credit score shows how healthy its finances are and how likely it is to pay its bills on time. The score, which is out of 100, is based on your payment and default history, how much debt you have, whether or not you've been in trouble with the law, the level of risk your customer base poses, and even your industry.
Small businesses with a credit rating have applied for business funding, taken out a small business loan, or paid a bill with a business credit card. A bad score can happen if you have a history of not paying back loans on time, either in part or in full. Your credit file will also show any credit checks that have been done in the past.
Can I get a loan for my business if I have bad credit?
Your business may not have been able to pay back its loan because of a sudden problem with its cash flow. This is what happens.
You might find that there aren't many ways to get money for your business, but if you're willing to slowly improve your credit score by paying off debts and showing that you're reliable, more lending options will become available.
You may have trouble getting money if you can't show that you've been in business before. Many lenders think that businesses with no or a short history of trading are too risky to lend to.
It's also important to remember that applying for multiple loans will hurt your credit score even more. With this in mind, it might make sense to use a credit broker or a lending platform like Funding Options, where you are matched with lenders based on your specific needs and financial situation.
How can I get my credit score to go up?
Before taking on more debt, you should work on improving your credit score. Here are three important steps you can take to improve the credit score of your business.
1. Have your credit report checked.
Review your credit report often to spot problems. Credit reference agencies are the ones who make credit reports. Your credit report is based on information about loans, and you'll get a score that shows how likely it is that you'll be able to pay back a loan.
2. Pay on time for everything
Your business's credit score can go down if you don't pay back loans or credit cards on time. The agencies that give your business its credit rating will be able to see its financial history, including any missed payments or CCJs.
3. Forms for credit cards
Remember that every time you try to get credit, it will show up on your credit report. When a lender turns down your loan request, it could hurt your credit score. This also goes for applications for credit cards.
Funding Options helps businesses in the UK get business loans. We work with more than 120 lenders who offer dozens of different kinds of loans. Funding Options lets you find out what your business might be able to get without affecting your credit score.