If you’re trying to launch a business but your credit score looks like a car crash, you shouldn’t assume that means you’re doomed as far as securing finance is concerned. You’re definitely not alone. Plenty of entrepreneurs have a few bumps on their record, and not just the odd late payment or old default, either, but maybe even a CCJ or two.
Don’t assume that a bad credit score immediately equals a big fat X on a loan application. Yes, having a bad credit score can make getting a start-up loan for your business a little trickier, but by no means does it mean you can’t get one at all.
Yes, lenders care about credit. But it’s not the only thing they look at. With the right preparation, strategy and support, you can still get the funding you need to get your business off the ground.
That’s why in this article, I want to talk about how:
- Lenders consider other factors beyond credit history.
- Lenders need assurance of repayment capability, which involves more than just a credit score.
- Entrepreneurs with imperfect credit can still obtain funding with proper preparation, strategy and support.
First Things First: What’s a Credit Score and Why Do Lenders Care?
A credit score is basically your financial report card. In the UK, lenders use it to judge how risky you are as a borrower. Things like missed payments, maxed-out cards unpaid bills all drag your score down.
Start-up founders often struggle because:
- You’ve focused on your business and neglected personal credit.
- You’ve had failed ventures in the past (we’ve all been there).
- You’re carrying debts from old loans or credit cards.
Lenders know not every successful entrepreneur has a spotless history, so you don’t necessarily need a spotless credit score to secure funding. But what lenders do need is confidence you’ll repay your debts, and that comes down to more than just a number.
Practical Steps to Strengthen Your Application
If you have a less-than-perfect credit score but want to make sure you strengthen your loan application, here are five steps you can take that will help.
1. Check Your Credit Reports
Get your reports from all three UK credit reference agencies: Experian, Equifax and TransUnion. Don’t assume they’re accurate. Errors and outdated info are common, and clearing them up could bump your score immediately.
2. Improve Your Credit Score
You won’t fix years of financial chaos overnight, but you can make quick wins:
- Pay down outstanding debts where possible.
- Stay on top of current payments.
- Get on the electoral roll.
- Keep your credit utilisation low.
- Avoid firing off multiple loan applications in one go, as it screams desperation.
Even small improvements show lenders you’re taking responsibility.
3. Use a Guarantor
A guarantor is someone with stronger credit who promises to cover repayments if, for whatever reason, you don’t. It massively strengthens your application. Family, friends or even business partners can step in, which lowers the risk for the lender. Just remember, it’s a big commitment for them, and the last thing you likely want is for someone to step in and have to save your bacon.
4. Explore Specialist Lenders
Not all lenders treat bad credit the same. Some, especially those focused on start-ups, look beyond your score and care more about your business plan and future potential. Working with brokers or platforms like Funding Guru can connect you with lenders who actually get it.
5. Don’t Forget the Basics That Still Matter
A strong application can offset a poor score. Focus on:
- Business plan: Clear, convincing and realistic.
- Financial forecasts: Cash flow, budgets and repayment strategy.
- Experience and skills: Show lenders you and your team know what you’re doing.
If you’ve thought it through and can prove your business makes sense, lenders are far more likely to look past your credit history.
How I Can Help
I know what it’s like to borrow with a messy credit history. And, I know how to make it work. That’s why I use my skills and experience to help entrepreneurs and business owners:
- Tidy up and strengthen applications.
- Connect with specialist lenders who consider more than just your credit score.
- Secure tailored funding options that fit your business, not just the bank’s tick-boxes.
Find out more about my consulting services and how I can help entrepreneurs like you secure funding, even if you have a less-than-ideal credit score.
Prove You Know Your Stuff to Secure Funding
Bad credit doesn’t have to block your start-up loan. It just means you need to work smarter by checking your reports, improving where you can, leaning on guarantors or specialist lenders and presenting a bulletproof business plan.
Key takeaways:
- Strengthen your loan application by checking and correcting credit reports, making quick improvements to credit scores and considering a guarantor.
- Explore specialist lenders who focus on potential and business plans over credit scores, and ensure a comprehensive, convincing application is prepared.
- Demonstrating business viability through a strong business plan and financial forecasts can outweigh concerns about credit history.
Ready to move past your credit history and get your business funded? I offer business consulting services and business loans, helping make your start-up loan a reality.
