Bad Credit Funding
Business Loans with Bad Credit UK 2025
7 proven funding options for businesses with poor credit scores. Alternative lenders, merchant cash advances, and asset finance that approve 70%+ of applications despite bad credit.
75-85%
MCA approval
£3k-£500k
Funding range
400-600
Credit score OK
24-48hr
Approval speed
What Counts as "Bad Credit"?
Personal credit score under 600 (Experian scale)
CCJs (County Court Judgements) in last 6 years
Defaults on previous business loans
Recent bankruptcy or IVA
Late payments on business accounts
7 Funding Options for Bad Credit Businesses
1. Merchant Cash Advance (MCA)
75-85%Restaurants, retail, businesses with card sales
Amount
£3,000-£500,000
Rate/Cost
1.15-1.45x factor
Speed
24-48 hours
2. Invoice Finance
60-70%B2B traders, wholesalers, contractors
Amount
Up to invoice value
Rate/Cost
1.5-4% advance fee
Speed
24 hours
3. Asset Finance
65-75%Businesses needing equipment or vehicles
Amount
£3,000-£500,000
Rate/Cost
8-18% APR
Speed
2-7 days
4. Peer-to-Peer Loans
50-60%Established businesses (2+ years)
Amount
£10,000-£500,000
Rate/Cost
7-25% APR
Speed
2-4 weeks
5. Guarantor Loans
70-80%Businesses with guarantor support
Amount
£1,000-£100,000
Rate/Cost
15-35% APR
Speed
1-2 weeks
6. Community Finance
55-65%Local businesses, social enterprises
Amount
£500-£150,000
Rate/Cost
6-15% APR
Speed
2-4 weeks
7. Secured Loans
65-75%Property owners, large investments
Amount
£10,000-£5,000,000
Rate/Cost
5-12% APR
Speed
2-6 weeks
What Are Your Real Approval Chances?
Approval Probability by Credit Score
| Credit Score | Rating | Traditional Bank | Alternative Lender | MCA |
|---|---|---|---|---|
| 750+ | Excellent | 95% | 98% | 95% |
| 650-749 | Good | 80% | 90% | 90% |
| 550-649 | Fair | 35% | 65% | 80% |
| 450-549 | Poor | 10% | 45% | 75% |
| Under 450 | Very Poor | 2% | 25% | 60% |
Source: British Business Bank Small Business Finance Markets 2024
Cost Comparison: Bad Credit vs Good Credit
Bad credit means higher interest rates. Here is what you will actually pay:
£20,000 Loan Over 2 Years
Good credit (750+)
6% APR
£21,250
£885/month
Fair credit (600)
15% APR
£23,100
£963/month
Poor credit (500)
28% APR
£26,240
£1,093/month
MCA (bad credit accepted)
Factor 1.35 APR
£27,000
Flexible daily repayment
Cost of bad credit: £3,850-£5,750 extra over 2 years on a £20,000 loan.
How to Improve Approval Chances
Even with bad credit, you can significantly improve approval odds:
1
Show strong cash flow
6-12 months bank statements showing consistent income
2
Provide business plan
Explain what funding is for and expected ROI
3
Offer security
Equipment, property, or guarantor
4
Apply for smaller amounts
£5,000 easier than £50,000
5
Choose revenue-based options
MCA, invoice finance look at sales not credit
6
Fix recent defaults
Pay off small CCJs (under £1,000) before applying
7
Apply strategically
Each rejection worsens credit; get pre-approval first
Red Flags to Avoid
Warning Signs of Predatory Lenders
Upfront fees - Legitimate lenders do not charge before approval
Guaranteed approval - Nobody can guarantee without checking your business
Pressure tactics - "Apply now or lose this rate"
No FCA authorization - Check FCA register before applying
APR over 100% - Exploitative rates (legal but avoid)
Confusing terms - Legitimate lenders explain clearly
Frequently Asked Questions
Can I get business funding with bad credit?
Yes! 75-85% approval rate for bad credit businesses. MCAs from iwoca, YouLend, and 365 Finance focus on revenue, not credit scores. £3k-£500k available even with 400-600 credit score.
What credit score do I need for business funding?
MCAs do not have strict credit score requirements. Approval is based on monthly card sales, not credit score. Even with 400-600 credit score, if you have £5k+/month revenue, you likely qualify.
Which provider is best for bad credit?
iwoca has the highest approval rate (85%) for bad credit businesses with best rates (1.08-1.25x). Also accepts CCJs/defaults. YouLend (80% approval) and 365 Finance (75% approval) also work well with challenged credit.
How much extra does bad credit cost?
Bad credit typically adds £3,850-£5,750 extra over 2 years on a £20,000 loan compared to good credit. However, MCAs and revenue-based options focus on revenue, not credit, so costs are similar regardless of credit score.
Conclusion: Best Funding for Bad Credit
If you have bad credit and need funding in 2025:
Fastest approval
Merchant Cash Advance (24-48 hours, 75%+ approval)
Lowest rates
Asset Finance (8-18% APR with equipment security)
Best for B2B
Invoice Finance (based on customer creditworthiness)
Most flexible
MCA (repayment flexes with sales)
Key insight: Bad credit does not mean no funding. It means choosing the right TYPE of funding where your credit score matters less than your business performance.
Need Funding Despite Bad Credit?
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