Having a poor credit history can often hamper business finance applications, especially with traditional banks and lenders. If you believe your credit rating is working against you it can be a frustrating time, especially if you're looking to push forward your business but have nowhere to turn. However, there are many alternative lenders which Approved Business Finance can approach who may provide a more suitable business finance solution?
SO... IS IT POSSIBLE TO GET BUSINESS FINANCE WITH BAD CREDIT?
It very much depends on your circumstances and willingness to use different forms of security, but it is possible to get business finance with a bad credit history. It’s always worth speaking to a broker about sourcing finance, especially if your credit rating is poor.
Often, businesses that experience financial difficulties would look to take up a finance solution, more often than not, by visiting their bank. However, due to various reasons, the bank is no longer an option for many SMEs, let alone business owners with poor credit histories. Because of this, we're starting to see more and more lenders who provide alternative methods of lending.
It's important to remember that with the availability of alternative lenders through finance brokers like Approved Business Finance, SMEs can secure business finance with less than perfect credit. Alongside this, there are various grants and government initiatives (such as BBL, CBILS and RLS in response to COVID-19) to help businesses grow and survive – making a business work rather than stop trading is a benefit to the UK economy.
WHAT DOES IT MEAN FOR MY BUSINESS?
Whether you have a weaker credit history or have recently encountered financial troubles, there are finance products available to provide support for various circumstances. As traditional banks tend to see things very much in black and white, our lending panel like to assess the business in more detail – ensuring that you have the opportunity to answer any queries about your business and its finances, giving you the best chance possible to secure that vital funding.
Here’s what to look out for. If you recognise that your business is in a similar position, don’t be put off searching for finance – there may still be a solution for you:
Aside from financial performance, which we touch on later, Business CCJs are one of the more common issues we come across when putting together finance applications. Lenders take into account how many you have, their value and the frequency at which you have received them.
If you have been subject to this order in the past (even if it has been rejected) this could affect your finance applications.
Visible financial performance:
When performing checks on your company, lenders often take a look at public data about your company. Even if you don’t believe the information is correct, some of the more traditional lenders will make assumptions based on your net worth and whether or not you hold a healthy amount of cash in your business. If your financial records are not up to date, it might be worth taking some time to ensure they are. If your records are missing files accounts or things of this nature, it certainly won’t help your application.
If there are failed or underperforming businesses with common directorship, this could influence the way lenders to perceive your business – even if it performing well.
People behind the business:
If people involved with the business have a personal history of IVAs, debt management plans or similar, it could prove to be difficult to source finance.
SO HOW DOES IT WORK?
As lenders require some form of security to provide finance to businesses, we're seeing more innovative methods of finding it. This can be done in several ways, and lender terms differ on a deal-by-deal basis. Overall, companies are getting more bespoke solutions, which is a great sign of a flourishing industry that wants to lend to small businesses.
For example, instead of looking at company Directors, certain lenders are willing to take into account a healthy turnover as a sign of a viable business, or some providers will use guarantees, or assets to secure funding. There are numerous possibilities.
WHAT ARE OTHER FINANCE PRODUCTS THAT COULD BENEFIT MY BUSINESS?
At Approved Business Finance we have a wide range of lenders who specify that more businesses are now able to access finance solutions by using different forms of security.
Asset Finance or Refinance:
For asset-rich businesses (e.g. equipment, vehicles, plant machinery) and cash-poor, there's a good chance that lenders are willing to take the assets as security. This guarantees the lender a lower-risk investment, as they're more focused on the security available than any other factors.
Some lenders will look past credit history and financial issues if the business is functioning well and has debt owed to it in the form of invoices, this can be quite common with businesses in construction or recruitment where invoices become a real factor when it comes to cash flow. If this sounds like your business, it's worth speaking to an Approved Business Finance about invoice finance. If your business is eligible, it could be a useful solution that not only serves as an alternative way of sourcing finance but helps you secure a more efficient income by fast-tracking invoice payments.
If you feel that finance could benefit you and your business then please do not hesitate to contact one of our account managers via firstname.lastname@example.org, call us on 01908 429888 or visit our 'Your Business Finance Guide' section of our website to download our Business Finance Guide.