Today’s guide teaches us how to get a loan in Australia for business with a bad credit score
A bad credit score for your business isn’t really good but that shouldn’t mean the end of your business.
Many business owners in Australia think that because of their bad credit score it is very difficult to take loans.
This is a false feeling made popular by bad lenders and creditors.
They want to try and look like the only loan option available and also charge high rates.
Let’s dive in:
First, let us get to know what a bad credit score is
What Is A Bad Credit Score
According to Investopedia, a bad credit score is when a person or a company is predicted to have the inability to repay a debt on time and in full.
It is based on the past history of the individual or company’s ability to pay off debt and related personal finance factors.
Once an individual takes out a loan, pay bills or uses a credit card, that person has a credit history.
How Credit Is Calculated For Business loan
A personal credit score typically below 580 on a range from 300 to 850 is typically referred to as a bad credit score
While a bad business credit score is typically one that’s below 50 (ratings usually range from 0 to 100).
You can learn more about your credit score here
Difference between Personal and Business Credit Report
Personal and business credit contains reports that provide information to creditors letting them decide on granting your loan or not.
But the personal credit report typically contains your name and personal information such as consumer credit accounts, other negative listings such as default payments and bankruptcies.
While business credit reports the company’s information such as company structure and shareholders, credit information and also applications and also defaults.
Note: When trying to get a loan for your business in Australia with a bad credit score, you can use a personal loan for business.
Steps On How To Get A Loan For Business From Australia With Bad Credit Score
- Business Case:
If you have financial trouble running your company, a loan may seem like the best solution for your problems.
But because of your bad credit finance is more likely to come at a cost.
So it’s highly important to know if taking a business loan would really benefit your business in the long term.
Your business case should state clearly how you plan on using the loan to grow and support your business.
You need to make proper estimates of how much you expect to make as a result of the money about to be injected.
Your estimates should be as accurate as possible factoring in administrative cost, taxes and all other expenses
- Supporting Documents:
When applying for a loan, you’ll be asked to provide documents to show you satisfy the creditor/lender’s criteria.
Bad personal or business credit records will make the creditor give priority to your cash flow and trading history.
Some of the documents are:
- Evidence that your turnover meets the minimum requirements of the creditor, such as your tax records, BAS.
- The bank statements of your business over a period of six months.
- Over the last six months, your merchant statements/credit sales to show the average sales level and stability of your income.
- Evidence to show you have been operational for the minimum period required by the lender.
- Personal identification documents.
And any other know-your-customer particulars they may request at the moment
- Choosing The Right Creditor and Loan Product
It is very important to give detailed thought and research to whomever you seek to collect loan from.
It is important to consider factors such as interest rates, chargebacks, and other terms before making the huge step.
At times a lower interest rate might not be the best option for your business.
You can always higher a professional finance broker for help.
The application is a very straight forward process and you typically get an answer the day or next.
The application process usually involves you filling a form online where you provide know-your-client details such as:
- Business name
- Reason for loan application
- Basic details about your business
- How you plan on using the funds
If your application is approved and successful, expect to get the funds in a short time usually a few working days.
Where You Can Get Loans From
Because of your bad credit, there is going to be zero to no chance of you getting credit from a traditional bank.
As a business in Australia, you can consider the options below:
- Secured bad credit business loans
- Alternative Lenders
- Invoice factoring
How Much Will You Be Able To Borrow
The amount you will be able to borrow depends entirely on the creditor or financial lender of your choice.
Because of your bad credit score, the financial institutions might be willing to only lend you a small amount of money.
Mistakes To Avoid When Trying To Get Business Loans From Australia With Bad Credit Score
You need to be very careful when trying to get funds or loans for your business.
You need to do thorough research so you can get the best deal available.
When researching, look out for a creditor who wants your business growth.
If you find yourself not well suited for the research, you can always employ a financial broker to help you with the best options open to help your company grow.
Your bad credit score will highly limit the funds you can receive but there are reputable Australian creditors who are willing enough to help you.
Although it is highly important to get your credit score well to make more options open to you.
We hope you got good information on how to get a loan for business from Australia with a bad credit score
We would like to hear your thoughts and if you have questions, ask and we will give our best answer.