Start-Up Business Loans with Bad Credit

Will bad credit stop you getting loan funding for a start-up business?

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, updated on July 12th, 2023       

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Bad credit makes many things more difficult when it comes to business finance, and getting money to launch a small start-up business isn’t easy to begin with. Are there any choices on the table for financing a start-up with bad credit? Explore bad credit start-up loans and explore your options with this helpful guide.

Can my start-up business get a loan if I have bad credit?

Yes – starting a business is a difficult job, and securing a loan when your business doesn’t have much of a financial track record is hard. Bad credit can also make things tricky but, fortunately, it is definitely possible to find loan options for a start-up business with less-than-ideal credit.

While larger banks are notoriously hard to get approval from if your credit score isn’t the best, there are many other lenders on the market. Online lenders in particular are well known for being very lenient with loan approval. In particular, an unsecured loan from an online lender is a good option to explore (especially if they have a low doc loan option), as they’re open to a much wider range of customers than the average business loan.

In addition to standard poor credit loans, there are also a number of specialised loans that are worth knowing about if you’re trying to establish a start-up with average credit. Many lenders have specific start-up loans on offer, which are custom built for start-up businesses and don’t require the trading history or business track record that lenders look for with a regular business loan.

Savvy’s a good place to get started hunting for a small business loan. With access to many of Australia’s top lenders, we can help you find a loan suited to your circumstances.

How can I improve my chances of getting a bad credit business loan approved for my start-up?

There are a few things that might tip the odds in your favour a little when it comes to getting a business loan approved with bad credit.

  • Have someone go guarantor – If you have a family member or close friend who’s in a strong financial position and is willing to back you, you could have them go guarantor on a loan. Effectively, this means they’re speaking on your behalf and offering to foot the bill if you can’t afford to make your repayments. It can make a lender much more willing to approve a loan.
  • Offer collateral – If you have assets available – like a property, significant vehicle or equipment to be purchased for the business – you also have the option of offering it as collateral on a secured loan. Collateral provides the lender with some extra security, lowering the risk, making approval more likely and getting you better terms on the loan. However, you can still be approved for finance as a small startup business without any collateral.
  • Improve your credit rating – Ultimately, the best solution for a bad credit rating is to try to rebuild your credit rating. This can take some time, but it’s the best long-term solution to improving your borrowing power. There’s information on some good ways to do that down below.

Explained: ways to improve the credit rating of your start-up business

Common questions about bad credit business loans for start-ups

If I'm a start-up business, will I even have a credit score?

All businesses in Australia receive a credit score, almost as soon as they start trading. It’s possible that your start-up is still early enough in the set-up process that it hasn’t yet qualified for a credit score, but if that’s the case, you’ll probably find it hard to get a business loan of any sort.

How do I know what my start-up business' credit rating is?

You can obtain a credit report on your business from a number of Australian credit agencies. It might take a few days to process and, unlike personal credit reports, you’ll probably have to pay for it. It also won’t have much information in it when your business is just starting, but knowing your score is a good place to start.

Does my personal credit rating affect my start-up's credit score?

Your personal credit and your business’ credit are quite separate scores and your business doesn’t inherit your score as such. It’s worth knowing, though, that most lenders will also look at the credit histories of a business’ directors when assessing a loan application, so your personal credit still has an impact. This is especially true with a start-up, where the business has very little credit history to assess and more weight is put on personal credit.

Are some lenders better than others when it comes to getting a start-up business loan with bad credit?

In Australia, larger lenders like the big banks tend to be far more particular about who they’ll approve for a loan. Modern online lenders are far more open to customers in less-than-perfect circumstances. With Savvy, you can compare business loans from a wide variety of top Australian lenders, many of whom have expertise working with bad credit.

Can I get a start-up business loan that requires no credit check?

No – credit checks are a fairly fundamental part of how lenders work in Australia. As well as providing credit information, they help the lender verify your identity. You’re not going to find a legitimate lender that will offer a business loan with no credit check, start-up or not.

If I get a small bad credit business loan for my start-up and things improve, can I refinance?

Yes – refinancing a loan is an option and, if your business trading history and credit rating have improved since you initially set up the loan, you might be able to get much better terms on the new loan. You’ll want to check if your lender has any penalty fees associated with repaying the loan early, as this can cut into the financial benefit of refinancing.

Can I take out an interest-free business loan?

Probably not – when it comes to interest-free loans, there aren’t really any options available to businesses. The next best bet is accessing a government grant which provides access to much-needed funds without the need to repay any debts. These often come with strict eligibility criteria relating to your business, its time in operation and its finances, so it’s worth keeping an eye on which programs are open on both the federal government’s website and that of your state government.

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