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Business Loans With Bad Credit History In Melbourne

Break Free Home Loans are a leading Melbourne mortgage broker, with over 20 years of industry experience. We provide lending solutions and advice tailored to your needs. We work closely with clients as trusted advisors and are accessible to clients when needed.

Our brokers work hard at understanding our client’s unique circumstances and helping them overcome common home loan challenges. Whether you’re a first home buyer or an experienced investor, we’ll help you find the best home loan for your situation. Whether you’re self-employed and have trouble proving your income or you’re a contractor or casual worker, we offer solutions for all types of clients’ income sources.

For most traditional lenders, qualifying for business loans with bad credit history is difficult if not outright impossible. However, due to various circumstances, having less than ideal credit is a problem for many businesses, even those that are successful. It’s for this reason there are lenders who offer business loans for bad credit applicants. If you are looking for a business loan for bad credit, our brokers can help you find the right lender and secure the financing you need. Talk to Break Free Home Loans today to compare lenders and begin your application.

What Are Business Loans For Bad Credit

When you can’t qualify for traditional loans, there are other finance options available. Some lenders offer business loans for bad credit applicants. They will allow you to demonstrate your business has the capacity to repay the loan. They won’t rely on bad credit as a determining factor to approve your loan. The following are some key considerations about bad credit business loans:

Can Personal Credit History Impact Getting Business Loans

Generally, if you have a low credit score, lenders may consider your business risky and reject your loan application. However, as this is a rather common issue for various businesses such as startups and SMEs, more finance options are made available. While you can’t find bad credit business loans with guaranteed approval, there are still some specialist lenders who can grant you funding. You can also opt for secured business loans, invoice factoring and business loans from non-bank lenders. With more flexible lending requirements, you can get the funds you need with less, little to no credit check.

How To Check Your Credit Score

Your business credit score will give lenders an indication of how risky you are as a borrower. While both your business and personal credit score will play a role in your ability to get a loan, they aren’t the same thing and have different implications. Your personal credit score is based on your individual consumer credit activities, while your business credit file contains information on your commercial credit activities. They don’t affect the other, but can work in tandem to support whether your business is creditworthy. You can get a credit report from your bank, financial advisor or third-party credit agencies. Each may differ in their method of calculating your score. This determines your ability to get a loan.

Your business credit file will include information such as:

  • Your company details such as information on company structure or shareholders
  • Registered defaults or missed payments
  • Potential loan enquiries
  • External administration
  • Public record information such as legal matters or actions taken against your company

How Much You Can Borrow

How much you can borrow is determined by the lender based on your financial security. They will assess your ability to repay their loan based on your business’ financial performance, existing assets and liabilities, projected revenue streams and more. The loan amount will also depend on what type of loan you’re applying for and what you will be using the funds for. You need to work out a budget for the loan and submit a business plan to lenders. In this document, you have to outline the use of the loan, whether that’s for long-term investment, upgrading equipment, renovation or repair works, working capital expenses or overcoming cash flow shortages.

Minimal Requirements

Lenders require your business to have relevant trading history and revenue streams. While bad credit business finance has a more flexible criteria, you still need to meet the loan’s minimum requirements. Aussie lenders will have their own minimum monthly turnover and minimum operating period. Check out these requirements when you’re comparing eligibility of your loan products. Only apply for a loan you can qualify for.

How To Get Approved For Business Loans With Bad Credit History

Our brokers can help match businesses with the right lender and type of loan that suits your needs. We can do all the legwork from legal paperwork to submitting your loan application and negotiating with lenders. When you have bad credit history, however, it’s important to go the extra mile to ensure your loan approval. These are some tips we recommend before you apply for your loan to reduce the impact of a bad credit score and maximise your chance of approval:
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Choose A Smaller Sum

Only borrow what you need. Choosing a smaller sum for your loan amount will make it easier for you to qualify with a lender. Lower borrowing amounts also mean repaying your loan off sooner, with a smaller monthly repayment amount. It’s why it’s important to determine what you need the loan for so you’ll know exactly how much you need to borrow and how much you can afford over how long.

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Get Rid Of Outstanding Loans

Applying for many loans in a short amount of time will incur many hard credit checks. Not only are multiple loan applications documented on your credit file, they will negatively affect your credit score. Pay off any outstanding loans, debts and other payables to assure lenders of your financial security and ability to repay your loan. Otherwise, this will create further expenses on top of your proposed loan obligations. You may not have enough to budget for your repayments.

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Guarantor

If you don’t have assets to provide as security for a business loan, having a guarantor or directors guarantee can offset this requirement. For a small business without much working capital, those with seasonal income or with assets tied up in legal disputes, this can mean the difference between getting your loan approved or rejected. A guarantee lets lenders recover outstanding debts from the guarantor if the business cannot make repayments. This is the biggest risk for a guarantor—having to pay back the loan when the original borrower doesn’t or can’t. If you’re planning to become a business’ guarantor, you have to be confident the company can afford the loan and pay it back on time. Otherwise, you’ll have to assume responsibility for the debt and it will show up on your credit profile.

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Collateral

Offering collateral as loan security will help your chances of approval when you have bad credit. Tangible assets such as inventory, property, accounts receivable, machinery, stocks, corporate bonds and other working capital can qualify as collateral. This depends on what your lender is willing to accept as loan security.

Things To Take Into Account When Getting Bad Credit Business Finance

When applying for business loans bad credit applicants should do all they can to get the best deal and interest rate possible. Here are some things to account for when applying for bad credit business finance:

Rates

Calculate your interest and comparison rate. This will give you an indication of the true cost of the loan.

Fees

You need to find out the fees that come with the loan. These will affect the total cost of your loan. Fees such as late repayment fees, penalty fees, establishment fees, administration fees and ongoing monthly fees can add up significantly over the life of your loan.

Terms

Take account of how long you have to repay the loan. The loan term will determine how much interest you’ll be paying over the years. This adds to the cost of the loan so you should make sure your repayments are flexible. Do the repayment terms suit the needs of your company’s cash flow? Some lenders may let you repay the loan daily, weekly, fortnightly or monthly. It’s important to find a loan that allows you to manage your business while making repayments on time.

How To Improve Credit Score In Melbourne?

Rather than going for business loan bad credit options, you can also opt to take the time to improve your credit score. Improving your credit will allow you to qualify for loans with more flexible repayment terms and lower interest rates. The following are some things you can do to raise your credit score:
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Reduce Your Limit

Reduce your borrowing limit. This includes lowering your credit card limit, and minimising your usage, but not closing your account. Lenders need to know if you can manage credit responsibly. The bigger your credit limit, the bigger liability lenders will see.
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Check For Errors

Take a closer look at your business credit report. You should inspect all your credit accounts and make sure the information is accurate. Inform the credit reporting agency if you spot any errors.
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Paying Bills On Time

Making payments on time will do wonders for your credit score. From utilities such as electricity, gas, rent to mortgage payments, it’s important to pay all your bills on time.
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Find The Right Lender

Finding the right lender who can help you prequalify for their loan will also help. You will have to pass a soft credit check, which won’t hurt your credit score. Don’t apply for many loans in a short period of time. Limit the credit applications you make. Multiple loan applications will result in hard credit checks that will impact your credit score greatly.

Avoid Bankruptcy

Pay off your debt, pay the amount in full if possible. This includes credit card debt, business debt and any consumer debt you have. Do not be tied to any bankruptcy or debt agreements, because this will damage the lender’s assessment of your eligibility.
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What To Use Your Loan For

There are a number of things you can use your business loan for, including:

  1. To buy new equipment or machinery
  2. To renovate your premises
  3. To buy stock or inventory
  4. To cover the costs of marketing and advertising campaigns
  5. To expand your business into new markets
  6. To cover the costs of hiring new staff
  7. To pay off existing debts or loans
  8. To finance the construction of a new premises
  9. To buy a new business vehicle

Alternatives To Bad Credit Business Loans

There are a few alternatives to bad credit business loans that you can consider if you are struggling to get finance for your business:

  1. Venture capital funding: This is where investors provide funding for your business in exchange for equity. This is investment from firms or individuals who expect a high return on their investment, and is typically only available to businesses with high growth potential.
  2. Business grants: There are various government and private sector grants available for businesses, although these can be difficult to secure. They are often competitive and subject to eligibility criteria.
  1. Personal loans: If you have a good personal credit rating, you may be able to take out a personal loan to finance your business.
  2. Family and friends: You could ask family and friends for financial assistance to start or grow your business.
  3. Debt crowdfunding: This is where people provide funding for your business in exchange for a share of future profits.
  4. Bank loans: Banks can be a source of finance for businesses, although they may require security such as property or equipment.
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  1. Hire purchase: This is where you pay for goods or equipment over an agreed period of time, usually with interest.
  2. Invoice finance: This is where you sell your outstanding invoices to a third party at a discount, in order to release cash that is tied up in them.

How To Choose A Lender For Bad Credit Business Finance

When you have bad credit, it can be difficult to get approved for business finance. However, there are lenders out there who are willing to work with you. Here are a few things to look for when choosing a lender:
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  1. Look for a lender who specialises in bad credit business loans. There are many lenders out there who specialise in this type of financing.
  2. Make sure the lender is willing to work with you to create a repayment plan that is feasible for your business.
  3. Get quotes from multiple lenders so that you can compare interest rates and terms.
  4. Read reviews of the lender online to see what other businesses have to say about their experience.
  5. Ask the lender for references of other businesses they have financed.
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By following these tips, you should be able to find a bad credit business loan that will work for your business. Remember, it is important to shop around and compare offers before making a final decision.

Have Any Questions?

Got any questions about your business loan application? Talk to our brokers today. Our expertise is matching businesses to the type of loan that fits their financial situation and industry. We can help you make an informed decision and find the most suitable loan product for your business needs.

Frequently Asked Questions

These are some of our most frequently asked questions:

How To Get A Business Loan In Melbourne If I Have Bad Credit?

There are a few options available to you if you have bad credit and need a business loan in Melbourne. You may be able to apply for a bad credit business loan, which is specifically designed for people with bad credit. Alternatively, you could try applying for a personal loan, which may be more flexible in terms of repayment terms and fees. You could also try using a credit card to finance your business, although this will likely have a higher interest rate than other options. Whichever option you choose, it’s important to compare the different offers available to ensure you get the best deal possible.

What Is The Minimum Score For Getting Bad Credit Business Loans?

The minimum score for bad credit business loans is usually lower than what is required for a standard business loan. However, the terms and conditions of the loan may be less favourable, such as a higher interest rate or shorter repayment period. If you have bad credit, there are a few things you can do to try and improve your chances of getting approved for a business loan:

  1. Get a copy of your credit report and check it for errors. If you find any, dispute them with the relevant credit agency.
  2. Try to improve your credit score by paying off any outstanding debts and making all future repayments on time.
  3. Shop around for lenders who are willing to consider bad credit applications.
  4. Consider a secured business loan, where you use an asset as collateral to secure the loan. This may improve your chances of getting approved, but it also means that you could lose your asset if you default on the loan.

In general, the qualifying criteria for bad credit loans are similar to unsecured business loans. Most lenders are able to provide options if you:

  1. Have been trading for at least 12 months
  2. Have an ABN/ACN
  3. Are registered for GST

Lenders can look into your ability to repay their loan value beyond your credit score. They can assess revenue streams, business performance and other liquidity ratios.

Can I Do Business Debt Consolidation Loan Bad Credit?

Yes. A bad credit debt consolidation loan allows businesses with bad credit and overwhelming debt in Australia to consolidate their finances into one easy loan. Instead of paying multiple credit repayments each month, you can simply pay one monthly repayment. This will give your business more financial control and a better ability to pay back its debts. Moreover, bad credit debt consolidation loans may charge you lower interest rates than the combined rates of your current debts. This will give you major savings every month.

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