All banks take credit score as a primary consideration before approving a loan application. The credit scoring is a tool that suggests how you have been managing your finances in the past. Nevertheless, borrowers with bad credit can still get small and short-term loans for their businesses. It is Bad Credit Business Loans.
There is a wide array of alternative lenders in the United Kingdom. These lenders can work with you if you have a credit score falling below a fair rate. Instead of your credit history, these lenders consider other factors that can serve as their security.
Here are options of Bad Credit Business Loans
Lenders have grown more lenient in recent years. Some lenders evaluate borrowing firms basing on their operating years and turnover.
Cash Advance
Several loan packages intended for small businesses and startups have applied this minimum requirement. Cash advance merchants also look primarily into your operations rather than at your credit scorecard.
A cash advance is similar to a loan in that a certain amount can be borrowed and must be repaid.
In a cash advance arrangement, however, funding is based on a business’ future credit and debit card sales.
It’s repaid through a pre-agreed percentage of your customers’ card transactions – directly linked to your takings. With this, you only pay back as you are earning which can be on a day-by-day or even week-by-week basis.
Asset
Some lenders are willing to shell out funds in exchange for a pledged asset such as equipment, vehicles or property. The lending is also known as a secured business loan. An excellent arrangement for businesses that have lots of assets but are struggling for capital.
The risk runs lower for the lender if it takes the asset as security. However, you increase the chance of approval of your loan application.
Nevertheless, unsecured- business loans are an exclusive offering of high street banks. But are made accessible to even those with a spotty credit history. The trend is amid the rise of peer to peer, specialist and state-backed lenders.
Meanwhile, there are cases wherein offering collateral and posting a personal guarantee can give you approval.
Invoice payments
There are businesses that have payments to receive from a customer in the form of invoices. The business can apply for invoice financing.
Invoice finance is great for businesses who must accept late payment terms.
The lender approves a high percentage of loan if there is a high percentage of the value of the invoice to collect.
Although some of these business loans have higher than average interest rates. But lenders charge more fees over your loan amount. Hence approval can be fast in this platform.
Bad Credit Business Loans option of lender
Here are some lenders worth considering based on credit score. It includes the qualification requirements, estimated costs, borrowing size, application and transfer of funds:
1. Kabbage – no credit score requirement
- Loan amount: £500 to £250,000
- Monthly Fee: 1.5% to 10% of the loan amount
- Repayment Term: six to 18 months
- Repayment Schedule: monthly
- Time-in-business requirement: at least one year
- Turnover requirement: at least $50,000 in annual revenue or $4,200 per month over the last three months.
- Speed of the application process: a few minutes
- Transfer of funds: A bank account can receive the funds within three business days. Meanwhile, a PayPal business account can receive it in a few minutes.
Partnering with Santander UK has allowed Atlanta-based Kabbage to serve small businesses in the UK. In both the UK and US which it services, Kabbage has achieved funding over 80,000 companies.
Kabbage is a preferred option because it does not have any specific credit score requirement. Its application process can also be entirely done online which makes the process convenient and fast for the borrower.
On the other hand, Kabbage’s rates tend to run a little high. Hence, many people are critical of their fee structure. Overall, however, Kabbage is worth investigating if you are looking for fast and easy access to a line of credit.
2. Fair Finance – no credit score requirement
- Time-in-business requirement: Two years
- Turnover requirement: not stated
- Loan amount: $10,000 – $75,000
- Interest rates: 1.2% – 4.2% of loan amount
- Other fees: 5% arrangement fee for new clients and 3% for existing ones
- Repayment term: six to 36 months
- Representative APR: 69.9%
- Repayment schedule: monthly
- Speed of the application process and transfer of funds: as little as three days
Established in 2005, Fair Finance has grown to be one of the high impacting community finance organisations in the UK. They also won a Big Society Award.
It offers business and personal loans as well as financial advisory services to over‐indebted residents and housing association tenants facing eviction.
The company offers Fair Business Loans. They offer to lend £10,000 to £75,000 to entrepreneurs unable to access mainstream finance for their businesses.
It requires security on depending on the type of applicant. If you are a sole owner, no requirement for a personal guarantee. If a business has a board of directors, they will require a personal guarantee.
Meanwhile, Fair Finance may take charges on the assets of business on higher value loan, but this will vary on a case by case basis.
3. Liberis – no credit score requirement
- Time-in-business requirement: at least four months
- Turnover: at least £2,500 in monthly debit or credit card sales
- Loan amount: $2,500 – $300,000
- Interest rates: none
- Other fees: a fixed cost starting at 9%
- Repayment term: based on sales
- Speed in the application process: less than five minutes
- Transfer of funds: in one day
Liberis is a cash advance provider that is backed by the UK Government’s British Business Bank. It offers a slew of financing products intended for different purposes.
For those with bad credit, the firm provides the Business Cash Advance. It is an unsecured type of loan which has smart technology. The approach looks into the current operations of your business and not just your financial past.
Liberis also claims to have a much higher approval rate than many of the high street banks. In fact, Liberis approves over 70% of applications.
Liberis has so far made more than £300 million cash advances. It supports over 40 companies across IT services and outsourcing, education, financial services, software, sport and media.
Bad Credit Business Loans Tip:
In all, there are only a few options left under bad credit business loans. Regardless of its easiness to access, it still has a high cost comparing to stellar credit history. So if you plan to get a loan, make sure your payments are made on time. On time payment can improve your credit score.