Having bad credit can substantially impact your ability to obtain financing for your business. Bad business credit scores could mean the difference between success and failure when getting approved for a commercial loan. Credit scores matter in Australia, but options are available, and the situation may be better than you imagine. Here’s how bad credit can affect your chances of obtaining a loan, along with some potential solutions.
Bad credit can significantly impede finding lenders willing to take a chance on your business. Many loans are available to those with bad credit have stricter terms than those that typically come with more conventional loan packages. These loans can also come with additional costs such as origination and annual fees, making them even less attractive compared to easier-to-qualify and better-term traditional loans.
Bad credit can make finding lenders to work with you a much more difficult task. Not only are there fewer loan options available, but the loans that can be obtained typically come at a much higher interest rate and cost than those available to those with good credit since lenders see the individual or business as a riskier investment. Higher interest rates act as compensation for the lender to offset any potential losses that may result from lending out money to someone who is deemed less reliable or trustworthy.
Those with bad credit looking to obtain business loans face a difficult situation. Suppose a lender sees a low credit score. In that case, they may choose to deny the loan application outright or, if they do consider it, will likely require additional information and collateral in order to proceed. This can put immense pressure on individuals looking to secure these loans as they try their best to prove their worthiness and convince lenders that they are still capable of fulfilling the loan’s terms.
Finally, bad credit can prevent you from getting approved for some business loans—like start-up loans or those with no credit checks. These loans are specifically designed for businesses with bad or limited credit histories, but bad credit can still be an obstacle.
While bad credit isn’t ideal when it comes to securing a commercial loan, there are still options available for those in need. If you’re looking to get bad credit business loans, look into specialised lenders who can help you get approved despite your credit score. Additionally, you may be able to secure better terms by providing more information or collateral to the lender.
No matter what type of loan you’re looking for, your credit score can have an impact on your ability to get financing for your business. Carefully consider all of the factors at play before committing to any loan—this will help ensure that you get the best deal possible and avoid any pitfalls along the way.
Perry Finance can help you secure a business loan.
If you are looking for a business loan solution but are concerned about a bad credit score, our Melbourne-based team of brokers creates individualised financial solutions specific to your company’s requirements. You will gain from our extensive industry expertise and experience in the commercial brokerage market, throughout the loan application process and into post-settlement.