Building a business is difficult enough in the UK. When you’re having a difficult time making payroll, you want to expand, or are looking to boost your business financially in the short term, business loans and other funding schemes may be exactly what you need. However, business loans for those with bad credit can be challenging, to say the least.
Whether you’re looking for startup business loans with bad credit or you’re an established business that needs some financing options, if you have bad credit it can limit your choices tremendously.
The Dynamics of Bad Credit
In the UK, if you have bad credit you can limit your funding scheme options in many different ways. Many small businesses rely on the owner’s personal credit as a way to get funding. If the owner has had bankruptcy filings, late payments, and other issues in the past, it can lead to a tremendously bad credit score. If that’s the case, lending institutions will likely be reluctant to offer any type of loan to help this person get started.
If you’re one of those individuals who is looking to start up a business in the UK, you know full well how important it is to find quality funding schemes to help you get things off the ground. Most financial institutions are not going to give you a second look if your credit is considered ‘bad.’ However, the government does offer programs for many small businesses throughout England, Wales, Scotland, and Northern Ireland.
This doesn’t, by any measure, mean you’re going to be eligible or qualified for these grants. It does, however, give those particular business owners some light at the end of their proverbial tunnel.
When you’re talking about bad credit and the limitations it puts on you, especially with regard to a small business, it can be frustrating at the very least. Many incredible businesses have started out because the owners had vision, determination, and the financial resources and support to help them launch their business. How many businesses throughout the UK today would not be there if it wasn’t for government grants, especially for those who have bad credit?
The Reasons People Have Bad Credit
There are many different reasons why people end up with bad credit. It could be due to a medical crisis, divorce, unforeseen circumstances, injuries, a failed business in the past, and more. It’s easy to assume that somebody with bad credit simply doesn’t want to pay their bills. That’s not the case in many of these situations.
For somebody who has an idea for a small business and can’t get loans because of bad credit, it can cause them to feel frustrated, anxious, and give up on their dreams.
The government doesn’t believe this should be the case. Even for businesses that may be struggling at the moment due to changes in competition, legal issues, a slowdown in the economy, or something else, the government provides a number of schemes these small business owners may be able to take advantage of in order to stay afloat, expand, and keep hiring.
The Primary Goal of Small Business Loans with Bad Credit
When it comes to any type of small business loan, whether the business owner has good or bad credit, the main goal is to keep the business going. If the government deems your business to be viable and has shown positive success in the past, no matter what situation it may be facing at the moment, it may very well deem your business to be a worthy investment and provide access to loans or grants.
If the small business owner is looking for loans to make payroll because other bills had to be covered, this may be considered a bridge loan to get them from one month to the next. This is commonly used by small businesses that are based on seasonal sales forecasts. In other words, if a particular business does well during the winter months, during the summer months they may need a grant or loan to get them through each month.
For businesses that have been established for at least two years, these government grants can provide them the opportunity to expand their business ventures, grow, and ultimately hire more workers in the future.
Options for Small Business Loans with Bad Credit
Unless the business has been tremendously successful and can show many years of financial data to a private financial institution, the best option will likely be to turn to the government for grants and small business loans.
The United Kingdom Business Funding Centre provides information and support to small business owners through their website or their contact number. You can access their website here.
You can go on to the website, fill out the requested information, including your business status, which may be that you want to start a new business, you hope to expand your current business that may be two years old or less, or you want to expand the business that has been around for at least two years. You’ll also need to include personal and business information based on the questionnaire and some financial information as well.
You need to be specific about your financial needs and expectations. If you don’t have a clear forecast for the type of small business loans you may need, it’s going to be difficult for you to obtain the financing necessary to expand or help your small business get off the ground.
Why the Government Helps Small Businesses with Bad Credit
The most significant reason why the government provides loans and grants to small businesses, even those with bad credit is because they understand when a small business gets off the ground and becomes successful, it is going to increase employment for people in the area. More employment means more tax revenue and a stronger and more robust economy.
Since there are numerous reasons why somebody may have bad credit in the past, just because one’s score is not up to minimal requirements through private financial institutions, that doesn’t mean they won’t qualify for some type of loan.
Preparing for Business Loans with Bad Credit
The best thing any small business owner or budding entrepreneur can do when looking for funding schemes, even though they have bad credit, is to be prepared. Even for businesses that have been established for quite some time, the more prepared they are, the greater the chances will be of getting the funding necessary.
So how does a small business or an entrepreneur with an idea get prepared? The most important thing is to understand their business and the industry as much as possible. For an individual who is looking to start a small business, they may have numerous questions with regard to expectations, projections, and more. That’s where they need to do an incredible amount of research.
It’s also essential that this individual has true passion for the work they’re going to take on. Starting a small business is no small feat. It requires a tremendous amount of time, energy, and perseverance in order to become successful, especially if they’re stepping into a highly competitive marketplace.
They need to understand their target market. What demographic will be their ideal customer or client? Would it be males between the age of 25 and 35? Will it be females over the age of 64? Will it be single mothers between 35 and 45? What will be their socioeconomic status? Will they be considered middle class, upper class, or those struggling with poverty?
This small business owner will also need to fully understand the best ways to reach them; in other words, marketing efforts. They need to have a plan on how to market their business once it is established.
It’s easy to assume that once you start your own business people are simply going to flock there, but that’s not the case. The small business owner or entrepreneur also needs to have a clear understanding about the products and services they hope to provide to their potential client base. How much will he be able to charge for those products and services? Will those prices be competitive?
They also need to know their competition. How many other businesses in the UK or around the world may be directly competing with them? How many of those competitors will be large corporations that have the ability to undercut this business on prices? What would be the advantage of this small business getting started in the UK as opposed to one in another country that may be able to target the same market online?
A small business owner who is looking to expand her operations will also need to be able to understand answer these questions. Small business loans may be available for those with bad credit to help them train employees, develop better products, build a website or even redesign an old, outdated website, purchase equipment, and much more.
What are the specific needs of this particular funding scheme? Will this small business owner or budding entrepreneur require a loan, grant, or some other aid scheme?
The Daunting Nature of These Questions
It can be almost overwhelming for many small business owners, especially those with bad credit, to even think they can qualify for some type of funding opportunity or scheme. However, thanks to the government, there are a number of options available.
The reason to begin asking yourself these questions and being able to answer them is when you apply for a loan, grant, or some other aid scheme, when you are prepared and can provide the right resources and information, it increases your chances of convincing the person of the other end of the phone or opposite the desk that you are a worthy investment.
Different government agencies have set aside finances that are directly intended to help support small businesses and entrepreneurs who want to get started with their small business, and they understand the challenges that these business owners can face, especially when they have bad credit.
Finally, Know How Much You Will Need
Lastly, when you begin looking for government funding, it is going to be absolutely essential that you understand exactly how many pounds you’re going to need to get your business off the ground or to expand your business properly.
There are many government backed grants and loans that can provide support and funding schemes in the amount of £5,000 to several hundred thousand pounds. As long as you have a clear idea about how much you’ll need and can justify that amount, you increase your chances of getting the type of business loan you’ll need, regardless of your credit.
So even though you may have bad credit, you may qualify for business loans. There may also be private financial institutions that provide business loans for those with bad credit. Not all financial institutions will have an interest in hearing about your history or even consider working with you if you have a bad credit score, but some do.
Before you begin looking into these options, though, it is absolutely essential you understand the risks involved in non-repayment. Look through all of your options before deciding on one funding scheme. As long as you’re aware of the cost of the loan, the benefits of a grant, or have access to other aid options, you should be in a good position to get the financing you need to start or expand your business.