How bad credit affects business borrowing
Lenders look at both your business and personal credit. With adverse credit, unsecured loans get harder and pricier, so the best options usually involve security, strong trading evidence, or a guarantor. Avoid the most expensive lenders that target struggling businesses.
1. Secured business loans
Backed by business or personal assets (property, equipment), which reduces the lender's risk and opens the door despite credit issues. Best for businesses with assets to offer — usually the most accessible route at a reasonable rate.
2. Asset finance
Because the equipment or vehicle is the security, asset finance is often available even with adverse credit. Best for businesses needing kit — the asset itself underwrites the deal.
3. Invoice finance
Lenders advance against your unpaid invoices, focusing on your customers' creditworthiness rather than yours. Best for B2B businesses with solid clients — your sales ledger does the heavy lifting.
4. Merchant cash advance
Repaid as a percentage of your card takings, so approval leans on sales volume rather than credit score. Best for retail and hospitality with steady card sales — but check the total cost carefully, as it can be high.
5. Guarantor or specialist lenders
A personal guarantee or a specialist adverse-credit lender can secure funding the mainstream declines. Best when you have a strong case or a willing guarantor — at a higher rate reflecting the risk.
Choosing the best route
- Have assets: secured loan or asset finance
- Strong B2B sales ledger: invoice finance
- Steady card takings: merchant cash advance (check the cost)
- Otherwise: guarantor or specialist lender
⚠️ Compare the total cost carefully — some bad-credit business finance is very expensive. A broker can find the cheapest route you qualify for and steer you away from predatory deals.
How to find the best option
A business finance specialist can match your situation to lenders likely to approve you at the best available cost. Find a business finance specialist through Nesto — free, no obligation.
Frequently asked questions
Can I get a business loan with bad credit?
Yes — especially with security, strong sales, or a guarantor. Secured loans, asset finance and invoice finance are the most accessible.
Does my personal credit affect business borrowing?
Often yes, particularly for newer businesses — lenders may check both personal and business credit and may want a personal guarantee.
What's the cheapest option with bad credit?
Usually secured or asset finance, because the security lowers the lender's risk. Merchant cash advances can be expensive — compare carefully.
What is invoice finance?
Funding advanced against unpaid invoices, based largely on your customers' creditworthiness rather than yours.
Will I need a personal guarantee?
Often, for adverse-credit or newer businesses. It means you're personally liable if the business can't repay, so consider it carefully.