How to get a start-up business loan with bad credit UK

Funding a business is hard, and the strain is felt twice as hard for start-up businesses. Start-ups enter an already competitive market, funding their venture with assistance from their families. This makes it tough for startups to have an impressive cash flow. At times, they might need extra cash flow to drive their business. But, what do you do when you start up has bad credit, and can you still get approved for a loan?

A bad credit rating may seem like a major setback and lead to the closure of some businesses; however, it is important to know that there is hope with payday loans for people with bad credit. Certain mainstream institutions such as banks will not consider giving you a loan while ordinary establishments will grant you a loan.

What is a bad credit rating?

Any score between 0-279 is very poor, while a score of 466+ is excellent.

•Personal group

So, how to you get a start-up business loan with bad credit in the UK? The first point of call would be to make contact with those closest to you. As trust is already built, it’s easier to obtain a loan from a close friend or a relative as opposed to asking a bank to grant you a loan despite being a “high risk” client. This also eases the pressure of having to pay back the loan over a short period, and common ground can also be reached.

•Crowdfunding

Crowdfunding is the latest and most innovative way to obtain funding today. There are many crowdfunding platforms available where you can appeal to the public for financial assistance. Platforms such as RateSetter, Syndicate Room, and Seeders are some of the popular crowdfunding platforms which are targeted at startups and businesses. Thousands of prospective lenders are signed up on these sites, and if they see potential in your business, despite your bad credit rating, they may take a leap of faith and grant you a loan. This would not otherwise be attainable with traditional institutions.

•Grants

Many organisations provide grants for small businesses and start-ups. Grants enable businesses to get on their feet quicker, without the burden of having to pay back the money. While a grant would ideally be the best sort of “loan,” they are limited to only certain amounts, and there are certain requirements that you have to accord to. Some of the grants start-ups can apply for include the Innovate UK Smart Grant program, Seed Enterprise Investment Scheme (SEIS), and Adur and Worthing small business grants. All the grants contain different values and requirements.

•Microloans

Microloans are essentially small loans that are borrowed to startups or business owners, at a low-interest rate. Microloans stem from borrowers showing concern in struggling businesses and aiming to assist them. Organisations such as CARE International UK and BRAC UK provide businesses with a second chance by supporting entrepreneurship and the success of small businesses.

•Venture Capital 

Venture Capital is another way in which you can receive funding for your startup, and the best part is that it is not a loan. Venture Capital is the exchange of cash for equity. It is similar to selling shares in your company. This funding model has grown exponentially, with investors paying close attention to young companies. However, venture capital for the investor aims to purchase equity in a high-growth company. Therefore, this may pose a challenge to startups with bad credit. However, if you can prove that with funding, your company can achieve high growth, then venture capital may be the answer.

There are several funding options available for start-up businesses with bad credit. Traditional organisations, such as banks, are no longer the sole lender in today’s financial climate. Startups can now turn to consider alternate routes such as venture capital, micro-loans, and grants. Your bad credit score need not be the end of your startup.

How to get a start-up business loan with bad credit UK