As far as it is about funding personal needs, you know all the requirements to apply for a short-term loan. Even your bad credit rating will not come in the way. However, you will likely pay a bit higher interest rates.
When it comes to taking out business loans in the UK, it sounds scary for two reasons
First, they are more expensive than personal loans; and
Second, they generally prefer a good credit standing (but many people are still confused between a business credit score and a personal credit rating.)
A credit score plays a crucial role to determine the affordability of a business loan. Entrepreneurs with a low rating are less likely to secure the loan. Still, each lender has different benchmarks to look over the affordability. It is the reason why some may accept your application despite an impaired credit rating.
When it comes to applying for a business loan, a lender will take into account both personal and business credit rating to assess the risk you pose to them. A business credit rating differs from a personal one.
The personal credit score, according to Experian, range between 0 and 999, but the business credit rating ranges between 0 and 100.
There is no such thing like a minimum credit score you must have to secure a business loan. Lenders generally do not accept loan application if it is less than 70.
A business credit score is essential to secure short-term business loans, but it does not imply that a lender will not peruse your personal credit history. If there is insufficient information to make the decision, a lender will go through your credit report.
They may run either hard inquiries or soft inquiries. However, the latter will not leave any impact on your credit score, and the former may pull it by five points.
Here are the other situations when you will need a personal credit score even for applying for a business loan:
Getting a business loan with bad credit is quite tricky, but some lenders are ready to lend money. Interest rates will likely be higher. If the nature of a business loan is secured, you can get money at better interest rates.
Various factors are out there that can affect your business credit score. It includes but not limited to business County Court Judgments, your net worth, and your financial history as a director.
Most of the ways to improve a business credit score are similar to those you follow to refine your personal credit report.
Now you must have come to know that both business and personal credit scores play a crucial role to secure a business loan. Some reputed direct lenders let you borrow money despite bad credit rating