Does a Poor Credit Score Affect a Business Loan?

Does a Poor Credit Score Affect a Business Loan?

Business loans can be important tools to help your business grow and can be a great way to inject capital directly into your company. Whether it’s an unsecured or secured loan you need, your business credit score will be taken into account, so it’s important to understand how a poor credit score affects your business loan approval rates.

In this blog, we cover why your business might have a bad credit score, how to build it up and how you can improve your chances of getting your loan approved to help your business reach its potential.   

We answer the key questions

We strive to get you the best possible business loan even if you have a less than stellar credit score. Millbrook Business Finance gives you the support you need when starting or expanding your business, with a quick and simple application process where funds can be in your business account within 8 hours. 

We are business people who understand how to help companies get their finances right, enabling you to plan and grow with confidence.    

Why does my business have a bad credit score?

A credit score or credit rating is a number that reveals how creditworthy your business is. A lower score would indicate to lenders that there is some level of risk involved with lending you money. A higher score means you are more likely to have a wider array of financial options available, such as a greater chance of getting business loans approved, higher credit limits and better rates

A bad credit score can be a result of a number of different factors, including a history of late payments or past defaulted loans. You may have even taken out a high amount of loans or simply exceeded your credit limit. 

Your business's financial performance will also be taken into account, so if you have not demonstrated that your company can make money over time then that could result in a lower score. All of these factors will reduce lender confidence that you are able to repay your loan and therefore you will be deemed higher risk.

Your business credit score can also be impacted by your personal credit score, which is more common if you have not been running your business for a long time.

How can I build my business credit score?

There is, unfortunately, no shortcut to building up your credit score. Firstly, it’s important that you keep your debt low, although a small amount of debt is necessary to help build up your score. It’s also recommended that you only borrow credit when it is absolutely necessary, as the amount you owe is also a major contributing factor to your credit score.   

Bill payments should also be paid on time to boost your credit score. Your payment history makes up the biggest proportion of your overall score so it’s a good idea to get into the habit of paying on time. When starting your business, creditors may look at your personal credit score so it’s important to always have enough money in your account for standing orders or direct debits.

You should also demonstrate your turnover by using your business account as regularly as possible. This involves things like paying business receipts into your business account and not your personal one.

What do lenders consider when reviewing a business loan application?

A lender will consider a number of different things when reviewing applications for business loans. First and foremost, they must use your credit score to determine the level of risk involved with lending the funds. They will also take into account the financial health of your business, whether it is profitable and how long it has been running. 

How can I prevent a poor credit score from affecting my business loan application?

At Millbrook, we strive to get you the best possible business loan, even if you have poor credit. To improve your chances of getting a business loan accepted, the best possible way is to build up your credit rating. As this may not always be an option, especially in the short term, here are some other ways to boost your chances: 

  1. Have a comprehensive business plan: Constructing a thorough business plan is a good way of showing the viability of your business, which can be especially helpful for new businesses. It’s important to prove to the lender that you are less of a financial risk, which can be difficult when starting up. The more comprehensive your plan, the more likely it is to get accepted. It should include a description of your company, the nature of the business, plus any marketing strategies and financing and funding information.   
  2. Consider a co-signer: Co-signers are another good way of safeguarding your loan repayments should you not be able to pay. Business loans will have a higher chance of approval if your guarantor has a good credit rating. 
  3. Look to borrow less: You may also consider lowering the amount of money that you want to borrow. A lender will be more likely to approve business loans that are smaller in size as this poses less of a risk. This is often not the first choice on anyone's list but should seriously be considered if your business finance plan allows it.


While a poor credit score can affect a business loan and your chances of getting one,  not all hope is lost. In the long term, proactively taking the steps to improve your credit rating will eventually pay off. For your short-term finance needs, approaching a reputable and helpful finance provider with a comprehensive business plan, and a cosigner if possible, should help secure the financing you need to move your business forward.  

Introducing Millbrook Business Loans

Business loans can be invested in any aspect of your company, wherever you need the financial support. Whether you need new equipment for staff, a property renovation, or simply want to boost your working capital, you can use the capital in the way that’s right for your business.

Millbrook Business Finance is trusted to help our members with their business loans and will give access to competitive rates. To apply for one of our business loans, a step-by-step guide can be found on the Millbrook business loans page.  Alternatively, to learn more about business finance and the ways it can support your business growth, check out our Complete Business Finance Guide.

For more information visit our business loan page, or contact us directly on 0333 015 3301 or use our contact page.  

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