Guide

Business Loans With Bad Credit: Secured vs Unsecured Options

Why credit history matters differently for each type

Unsecured lenders rely heavily on your business and director credit score because there’s no asset backing the loan. A poor history, including a County Court Judgment, missed payments or a low credit score, has a direct, often disqualifying, impact on unsecured business loan applications.

Secured lenders still check credit history, but it carries less weight because the pledged asset offsets their risk. A business or director with bad credit can find a secured business loan more accessible, provided there’s a suitable asset with enough equity to offer.

What “bad credit” typically means to a lender

• A low business or personal credit score from one of the main credit reference agencies.
• County Court Judgments (CCJs), especially unsatisfied ones.
• Missed payments or defaults on existing credit, including cash flow gaps that show up as late payments.
• A recent history of late filings at Companies House.
• For newer businesses, a thin credit file rather than a genuinely poor one, since there simply isn’t enough history yet to score well.

Funding options if you have bad credit

• Secured business loans against a suitable asset, where the collateral does much of the work a strong credit score would otherwise do.
• Merchant cash advances, repaid as a percentage of card sales, which some lenders weigh more on cash flow than credit score.
• Invoice finance, which releases cash tied up in unpaid invoices rather than relying primarily on credit history.
• Specialist bad-credit lenders, who price for the additional risk but will still consider businesses that mainstream unsecured lenders decline.

Bad credit business loans in more detail

“Bad credit business loans” isn’t a single product, it’s shorthand for several routes a business with a poor credit history can still pursue. A merchant cash advance, repaid flexibly as a percentage of card sales rather than fixed instalments, suits a business with strong, growing customer transaction volumes even where the credit score itself is weak. See our unsecured business loan vs merchant cash advance comparison for how the two stack up. Specialist small business loans aimed at the credit business loan segment exist too, typically at a higher cost to reflect the risk, but genuinely open to businesses mainstream unsecured lenders would decline. Whichever route, expect the costs, whether that’s rate, fees, or the percentage taken from card sales on a cash advance, to run higher than for a business with clean credit, which is the direct trade-off for a lender taking on a bad-credit business loan in the first place.

Practical steps if your credit history is a concern

1. Check what a suitable asset could unlock. If you own property, equipment or vehicles with meaningful equity, a secured business loan may be realistic even where unsecured isn’t.
2. Be upfront with the lender. Specialist lenders exist for adverse-credit scenarios; a clear, accurate picture upfront leads to a faster, more accurate decision than one that surfaces issues during underwriting.
3. Improve what you can before applying. Registering to vote, correcting errors on your credit file, and reducing existing credit utilisation can all improve your score before you apply.
4. Compare both routes properly. Use our secured vs unsecured comparison and both calculators before deciding which to pursue.

How much you could still borrow

Bad credit typically means a smaller loan, a higher rate, or both, rather than an automatic decline, particularly if you have an asset to secure the loan against. Our 60-second eligibility check is a no-obligation way to see what’s realistic for your business’s specific credit position before committing to a full application.