Can I get a business loan with no credit check?
Unfortunately it’s next-to-impossible to get a business loan without some form of credit check. However, if you’re worried that you won’t be approved for a business loan because of bad credit, there are still plenty of options for businesses with poor credit.
It’s also possible to check whether you’ll qualify for a business loan without going through a “hard” credit check. This means that you can check your eligibility for a loan without it affecting your credit score or appealing on your credit file.
Why can’t I get a no-credit-check business loan?
Lenders want to make sure that they’re only lending money to people and businesses that will ultimately be able to pay it back.
However, they have no real way of knowing if that’s the case without checking your credit score, and your credit history is used to assess how risky it will be for them to lend you money.
That’s why no responsible lender will offer you a loan without running some kind of credit check. However, that doesn’t mean you can’t get a loan at all. It just means you’ll need to approach the problem differently from business owners who can boast a spotless credit record.
How do I check if I'm eligible?
- Look for your lender’s eligibility checker. Most lenders will have some kind of link or box that says “check your eligibility first”. Use it.
- It’ll ask for both your business’s details and your details, but it will only run a so-called soft check, which will take a quick look at your credit report without leaving any permanent mark on it.
- Many full loan applications in a short period of time could impact your credit score because they convey the feeling that you’re desperate for money. So, in order to get the full picture of the loans you can get, you should always check your eligibility before actually applying.
Secured vs unsecured business loans and personal guarantees
What impact will a low credit score have on the terms of your business loan? It depends, but here’s a basic list of what you can expect:
- You may be asked to secure your loan. If your credit score isn’t great, securing your loan may give the lender the extra guarantee it needs to accept your application. Secured business loans have their drawbacks – for one, you’re putting your assets directly on the line. If you can, try using a business asset and not your personal property as collateral in order to avoid risking your house if things go wrong. Moreover, secured business loans always take longer because the lender has to assess the value of the collateral you’re offering first.
- You may be asked to give a personal guarantee. Unfortunately, this is a fairly common practice in the UK, even for businesses whose credit score is acceptable. Again, securing your loan against a business asset is less risky than giving a personal guarantee because it doesn’t go anywhere near your personal finances, but it may not always be possible. Find out more on how personal guarantees work in our dedicated guide.
- You may be offered higher rates. These days, a reasonable number of lenders specialise in offering loans to businesses that have bad credit. However, it will most likely cost you more, especially if you’re in a hurry and thus looking at quick business loans that are normally unsecured.
What types of business finance can I get with bad credit?
Here is a list of business lending options that are still available to those with poor or limited credit:
|Type of finance||Security||Repayment terms||Good for||Bad for|
|Business credit cards||Revolving||Unsecured||Flexible – no interest is charged if you pay monthly|
|Overdrafts||Revolving||Unsecured||Flexible – but the longer you borrow, the more you’ll pay|
|Business line of credit||Revolving||Secured or unsecured||Flexible – but the longer you borrow, the more you’ll pay|
|Invoice financing||One-off||Secured against your invoices||Short-to-medium terms – tied to invoice payments|
|Merchant cash advances||One-off||Unsecured||Short-to-medium terms – tied to credit card takings|
|Asset financing||One-off||Secured against business assets||Medium-to-long terms – usually repaid in monthly instalments|
|Short-term business loans||One-off||Unsecured||Short terms – usually repaid in monthly instalments|
|Business loans||One-off||Secured or unsecured||Long terms – usually repaid in monthly instalments|
How do lenders assess my eligibility?
It depends on the lender, but the following are all likely to affect your business’s chances of getting credit:
- Your business credit score. Most lenders will at least take this into account. It consists of many different sub-factors, and it also depends on the credit reference agency, but you can improve it by making sure your business’s accounts are always filed on time, never making late payments (to a financial institution or to a supplier), avoiding CCJs and not doing too many credit applications in a short period of time.
- How long your business has been trading. Most lenders won’t lend your business money unless it has been around for at least a couple of years.
- Your business finances. Be prepared to give information on your business’s annual turnover, profit, trading and payment history. You may also be asked to provide your business’s full accounts.
- Your business plan. A strong business plan will show your lender how you’re planning to use the money you’re asking for in order to ultimately increase profit.
- Your personal credit score. Some lenders will look at this, especially if your business only has a short credit history. Some credit reference agencies will produce a “blended” credit score that looks at both personal and business reports.
How to improve your chances of getting approved
- Check the eligibility criteria first. Do this even before looking for the eligibility checker. There’s no point in wasting time if, for example, the lender you’re looking at only works with limited companies and you’re a sole trader.
- Keep an eye on your credit score. The credit reference agencies (Experian, Equifax and Callcredit) will let you access your credit score for free. Keep an eye on it and if it’s lower than you expect, you can consider paying to access the full report and act on it if you need to.
- Check your website and social media. These days, your business’s online presence is more important than ever. Some lenders will look at it, especially if you’re running a startup that doesn’t have much of a credit history.
- Do your homework. Research your options first. Lenders often specialise in certain types of products or business profiles, so you need to find a good match.
- Be realistic. Don’t apply for a sum you already know you can’t afford to pay back.
- Don’t be sloppy with your application. Gather all the necessary documents and keep everything in order – do your best to make your business look as sharp, professional and reliable as possible.
At the end of the day, lenders want to make sure you’ll be able to pay back your loan, and anything you can do to demonstrate this will improve your chances of being approved.”
While there’s no real way to get a business loan or finance without a credit check, it’s still possible to check your eligibility for a business loan without it appearing on your credit file. Furthermore, if you’re worried you won’t be approved for a loan because of bad credit, there’s also a number of options available to you.
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