Short term loans for bad credit

If you’ve recently had a business loan rejected, it’s possible the reason may be your business’s credit score. If this is the situation you’ve found yourself in, here’s a bit of information around understanding credit scores as a business owner and how suitable short term loans are if you do have bad credit.

Understanding credit scores as a business

Just like you, your business has a credit score. You can view your business credit score by using a tool like Tide Credit Score Insights. Once you find out your business’ credit score, compare your number to reports online of what a “good” number is. Be aware the numbers may differ from personal credit score numbers.

👉 Did you discover your business has bad credit? Here’s how to transform bad credit when you need a business loan.

Wait, do lenders use my business or personal credit score?

That depends. They may use one and not the other, or both. This may be based on whether you’re applying for funding as a sole trader, limited company, start up, or if you’re providing a personal guarantee.

For example, the Government’s Start Up Loan Scheme is taken out in your name, but used for business purposes. In this instance, the lender would likely check your personal credit score. If you’re taking out a loan as a business but are providing a personal guarantee, the lender may check both your business and personal credit scores.

To find out your personal credit score, check ClearScore or another provider.  

What is a short term loan for bad credit?

It’s important to be aware that bad credit doesn’t always mean a history of being irresponsible with money. It can often mean a limited trading history, for instance, if you’ve never taken out a loan or needed to pay regular bills, then your credit history may be very limited which can result in bad credit. 

With that in mind, a short term loan for bad credit enables you to borrow a sum of money for a limited period, usually not surpassing a year. They are designed to provide short term (sometimes emergency) support to businesses and sole traders with poor credit.

These types of loans can, if used responsibly, help build a credit history which could help businesses with poor credit grow their credit score and attain further funding in the future.

What are the pros of short term loans for bad credit?

The advantages of short term loans for bad credit are:

Accessibility

Short term loans for bad credit can be more accessible to businesses with poor credit or less of a trading history.

Speed

Short term loans are, by their nature, faster. These types of loans may be suitable if you don’t want to be tied into a long term agreement.

Flexibility

Short term business loans can sometimes be worked around your schedule. For instance, it’s possible to gain access to a short term loan that only lasts several weeks, or you may be able to get one that has a one year loan term. 

Similarly, both secured (think: bridging loans) and unsecured (business overdrafts are usually unsecured) short term business loans exist, so you may be able to gain access to short term funding whether you want to use an asset as collateral or not.

What are the cons of short term loans for bad credit?

With any funding solution, it’s also important to look towards the possible disadvantages and risks:

High interest rates

Both short term loans and bad credit loans come with high interest rates, making this a serious consideration for you and your team if you choose to leverage this financial tool.

Predatory

There is a long history of fringe lenders acting in a predatory nature when it comes to both loans for people and businesses with bad credit and short term loans. Be very careful when accessing this space. If you can, work with established lenders and brokers and review any agreements and interest rates carefully.

Missed payments

Missed payments and defaults would impact your score negatively. Consider carefully before applying what would happen if you cannot repay the loan in the manner you are currently counting on. For example, if you’re using the loan to purchase inventory with the intention of selling that stock within the next few months, what happens if the sale falls through? We always recommend keeping a company emergency fund – a pot of money that can be drawn on if the unexpected happens. This can help protect your score.

Find a short term loan

Want to apply for a short term loan? Click the link below and submit your information to find out if you’re eligible for our lender matching service. While completing an application would impact your score by adding a hard search to your record, simply filling in this initial form and finding out if you’re eligible will not.

Find a short term loan.

Short-term lending can lead to financial difficulty and is not suitable for everyone. Contact us for support if you ever face difficulties making your repayments. Warning: Late repayment can cause you serious money problems. For help go to moneyhelper.org.uk

Please note that the information above is not intended to be financial advice. You should seek independent financial advice before making any decisions about your financial future.

It’s important to remember that all loans and credit agreements come with risks. These risks include non-payment and late-payment of the agreed repayment plan, which could affect your business credit score and impact your ability to find future funding. Always read the terms and conditions of every loan or credit agreement before you proceed. Contact us for support if you ever face difficulties making your repayments.

Funding Options, now part of Tide, helps UK firms access business finance, working directly with businesses and their trusted advisors. Funding Options are a credit broker and do not provide loans directly. All finance and quotes are subject to status and income. Applicants must be aged 18 and over and terms and conditions apply. Guarantees and Indemnities may be required. Funding Options can introduce applicants to a number of providers based on the applicants' circumstances and creditworthiness. Funding Options will receive a commission or finder’s fee for effecting such finance introductions.