Bad credit business loans are mainly targeted towards businesses that have had defaults. There are lenders that can even accept more than one bad credit record.
Lenders have strict lending criteria so many businesses don’t usually qualify. One of these requirements is the presence of a security property.
However, there are ways to increase your chances of getting approved. Find out how lenders assess bad credit business loans and what you’ll need to qualify.
It's all about your security property!
Lenders consider bad credit business loans to be very risky. This is why a good and acceptable security property is essential.
Without a security property, it’s highly unlikely that you’ll qualify for a bad credit business loan.
If you have a security property that’s in good condition, at a good location such as a regional centre and isn’t specialised or unusual then:
- You can borrow up to 80% of the value of a residential property.
- You can borrow up to 60% of the value of a commercial property.
- If you don’t have security then we cannot help you to get a loan.
Note that you’re typically limited to borrowing up to a maximum loan size of $10 million. This depends on the strength of your business, loan application as well as your loan proposal.
How can I qualify for a business loan with bad credit?
There are no set guidelines to qualify for this loan type. This is why all applications for bad credit business loans are assessed case by case. Lenders take different factors into consideration before granting loan approval.
Generally, you must meet certain requirements such as:
- You must have a stable and regular cash flow. You can prove this using cash flow projections, BAS statements or tax returns.
- Your business must have been running for two to three years. However, a few lenders may even accept a business that’s been running for only one year.
- You don’t have multiple bad credit records or any major defaults.
- There hasn’t been any recent restructuring in your business.
- You’re an Australian resident and your security property is in Australia.
If you have substantial equity in property, you’re more likely to qualify. Note that lenders consider a non-specialised residential or commercial property as an ideal security. E.g. offices, factories, restaurants and retail premises.
Lenders particularly consider the size, age and number of credit issues. You can get approved with smaller defaults in the past year rather than larger ones in recent months. Multiple bad credit records spread out over a few years indicates long term hardship.
Another key point is proving that the issue was in the past. You’ll have to justify the bad credit record and prove that it was a one off event.
Lenders also prefer experienced and knowledgeable borrowers. A great business loan proposal can help you significantly.
Our mortgage brokers specialise in bad credit business loans. With many years of experience in the mortgage industry, we know what lenders are looking for in borrowers.
Call us on 1300 889 743 or complete our free online assessment form to speak with one of our mortgage brokers today.
Which lenders offer bad credit business loans?
There are many lenders that offer standard business loans but bad credit business loans are a different ballgame.
Lenders consider bad credit business loans on a similar level of risk as no doc business loans. Major banks and other lenders will likely decline your application. This is why only a handful of lenders have them on offer.
You’ll need to apply with a non-bank lender that specialises in bad credit lending. These specialist lenders are more flexible with their policy and approve bad credit business loans.
If your business has been liquidated, you can apply for a liquidated company mortgage instead.
Bad credit business loans FAQ
Bad credit business loans vs. waiting for credit to clear
Bad credit business loans are designed to be a short term solution. They can be great if you’re planning on taking advantage of supplier discounts or you need working capital.
Waiting for your credit to clear can be a good option if you’ve missed payments or have defaults. This is even more so if you have only a few months to get your credit cleared. This way you can qualify for competitive business loan interest rates.
Ultimately, the decision depends on your goals for the business. If you’re waiting, you can check out credit repair services such as Credit Repair Australia.
The above must not be taken as financial advice. It’s recommended that you speak with a professional financial advisor before making a decision.
What makes up a bad credit history?
A bad credit history includes one or more of the following records on your credit file:
- Defaults, judgments and court writs.
- Liquidation and bankruptcy.
- Part IX and Part X debt agreement.
Please note that the following are also considered bad credit but don’t show up on your credit file:
- Mortgage in arrears.
- Breaching the terms of a business loan.
- Overdrawing a business bank account.
- Bad history with a lender.
If the lender sees you as a strong, low risk business, they may accept multiple bad credit records.
Can a guarantor help me get approved?
Yes, a guarantor can help you get approved for a bad credit business loan. However, a guarantee usually isn’t sufficient enough on its own to get you approved. A guarantor will lower the risk to the lender but you’ll still need to show that you’re a strong business.
Be sure to refinance your bad credit business loan to a standard business loan as soon as you can. This way you can avoid paying more in interest.
We have mortgage brokers who have many years of experience with bad credit business loans. We can help you qualify by building a strong case and finding the right lender.
You can speak with one of our credit specialists by calling us on 1300 889 743. You can also fill in our free online assessment form and one of our mortgage brokers will contact you instead.