Finding an affordable loan if you have a poor credit rating has never been easy. However, things can be even more difficult when trying to get a small business off the ground due to the reluctance of banks and building societies to take anything they believe poses a risk.
In the following article we highlight 3 of the best options available to small business owners along with exploring exactly why despite UK Government intervention, banks are still so reluctant to lend to small businesses owners.
Which way should business owners turn?
The good news for business owners is that despite the reluctance of banks to offer them an affordable option, there are still a number of excellent alternatives which can be explored.
No. 1 – Secured Loans
Regardless of whether you are looking for a business or personal loan, one of the most important factors of any application is the credit score of the applicant. A low score is likely to see the application rejected and a high score will increase the chances of success.
Some lenders offer a way of cancelling out the importance of personal finance ratings and one of the most common ways is by securing the balance of the amount borrowed against a property (or something of high value) owned by the borrower.
By offering your home as security, the lender will be exposed to a reduced risk as they will be in position to re-possess the property should you fail to make the necessary repayments.
Please note – This is a very risky proposition is one that should be avoided wherever possible.
No. 2 – Peer to Peer Lending (such as the Funding Circle)
Peer to Peer lending works by providing borrowers with access to a marketplace which connects established businesses looking to borrow, with people and other investors who are looking to lend funds.
By cutting through the red tape and removing the costs and hassle of dealing with banks, some
borrowers will have the opportunity to get a sizeable and affordable loan in a relatively short period of time (typically up to a week).
There is still a little scepticism regarding this type of lending and this was explored by a recent
article in the Guardian, titled ‘Is peer-to-peer lending too good to be true?’
For more on this story, please view below:
No. 3 – Loans with a Guarantor
This offers the safest of these 3 options and if you are looking to obtain an amount of up to £10,000, this is very likely to be the best option for you.
These loans work by asking for a 3rd party to co-sign the agreement and are by far the cheapest of all the ‘no credit check loan’ options.
The person acting as the guarantor will only be called into action should the borrower fail to make scheduled repayments and assuming all of the repayments are made on time, they can help the borrower take significant steps towards improving their rating.
Why won’t the banks lend to businesses?
Despite pressure from the UK government to increase the lending to small and medium sized business by High Street lenders, things are not changing quickly enough.
A recent BBC article highlighted the fact that “Small and medium sized UK businesses are still struggling to access enough funding despite efforts by the government to boost lending, the Public Accounts Committee has said.”
“The MPs said net lending by banks using the Funding for Lending scheme had fallen by £2.3bn since June 2012.”
It added there was little understanding of where support was most needed.
For more on this article, please see below:
Perfect for personal loans as well!
In fact, even if you do not have a small business but need information about some of the best alternative financial options, our website highlights a number of excellent alternatives to turning to your bank manager.
For more in this please click on the following link – /no-credit-check/
Could your rating use a little improvement?
There is only one way to accurately assess the level of your current rating and that is by visiting the Checkmyfile website to obtain the UK’s only multi-agency report.
Affordable options for business owners with a poor credit score
The best way to avoid the risks associated with more expensive financial options is to avoid taking them out altogether. By using our calculator and simple to complete application form, we offer the chance to submit a single calculator to a number of the UK’s best and most reputable lenders.
Not only will you quickly begin to receive no obligation quotes, you will also not be credit checked by our lenders.