If you are thinking of starting your own business, it’s vital that you’re able to access working capital for your company to grow and succeed. While a line of credit should be your first port of call, many business owners face the difficulty of being knocked back from funding applications because of their poor credit score. To help overcome this, here are a few things you can do to start a business with a poor credit history.
Manage Unrealistic Credit Requirements
One of the main obstacles that many small businesses face when on the hunt for funding are the strict rules and regulations that high street banks place on their loans. For most normal companies, these types of restrictions set the bar far too high. While banks tend to boast about having billions of pounds put aside for small business development loans, many small companies find qualifying for one a challenging experience. If you can’t get approved for a business development loan, you will need to improve your credit, or seek out lenders who aren’t as strict with credit scores. You should also have a business plan in place that can help lenders decide whether to offer you a loan or not.
Bad Business Credit Vs Poor Personal Credit
Knowing the difference between whether you have bad business credit or poor personal credit is an important factor to know. Lenders are becoming more interested in how your company is doing right now, rather than how you have been doing in the past. During the application stage, they will examine your financial records, but also look at your reputation too by seeking out customer ratings and reviews. These aspects will help a lender make their final decision, so whether you’re a sole trader, start-up, or an existing small business, you may still be eligible to get a loan.
How to Overcome Bad Credit
If you’re willing to put the time and effort in, there are various things that you can do to improve your credit rating. Your business’s credit rating score is determined by numerous factors, such as previous loans you’ve taken out, credit cards, mortgages, and overdrafts. You may find that your personal finances are taken into account too. It’s important that you’re able to seek out any areas that aren’t working in your favour which can help when it comes to overcoming bad credit. Trying to clear your credit cards and pay off any outstanding loans should be your first step. To help you get a better idea of your finances, you should obtain your credit score, which can give you a clearer overview of anything that’s having a negative impact on your business.
Finding a Loan
Finding the right loan for your business is important, so you may want to consider using a loan finder service to help you find a loan for bad credit UK. If your credit file is far from perfect, a service like this can help you find a lender that will look beyond your initial report and instead look at your ability to repay the loan based on what your present circumstances are like.
No matter what type of funding you’re looking to get for your business, it pays to be prepared. Whether you have bad credit, good credit, or no credit at all, having a business plan in place that outlines the ins and outs of your businesses can help lenders know more about your company and help with the decision process.
