Bad credit business loans in Australia

“Bad credit” is a blunt label for a wide range of situations. A business owner who paid a phone bill 70 days late once and a business owner with three unpaid judgments both get called bad credit, yet a sensible lender treats them completely differently. The first step to getting funded is being precise about which one you are.

What does “bad credit” actually mean to a lender?

A credit report can contain several kinds of negative information. The OAIC’s overview lists the categories, and here’s roughly how specialist business lenders tend to see them:

On the report	What it says to a lender	How heavily it tends to weigh
Late payments in repayment history	Cash was tight at times	Light, if recent months are clean
Financial hardship arrangement	You asked for help and got it	Light, and it drops off after a year
Several recent credit enquiries	You’ve been applying a lot	Moderate, depending on the pattern
Defaults	A debt went unpaid for a while	Moderate to heavy, depending on age, amount, status
Court judgments	A creditor sued and won	Heavy while unpaid
Personal insolvency	Bankruptcy, a debt agreement or a personal insolvency agreement	Heavy, but assessed on what’s happened since

Two timing points are worth knowing. The OAIC says repayment history information stays on your report for two years, and information about a financial hardship arrangement stays for one year. So a rough patch eighteen months ago may already be fading from view.

Why do banks struggle with bad credit when specialists don’t?

Banks rely on automated scorecards to process volume. A score below a cut-off, or a single category of listing, can end the application without a person reading it. Specialist and private lenders work in smaller volumes and make judgment calls. They ask why the problem happened, whether it’s fixed and whether the security and cash flow make the loan sensible anyway.

That’s not the same as ignoring credit history. It’s weighing it properly. A lender still needs to believe you’ll repay.

What makes a bruised credit file fundable?

In our experience, four things move a difficult file from no to yes:

• Security. Property equity is the strongest counterweight to credit problems. Property-secured business loans run from $20,000 to $5,000,000, including first mortgages, second mortgages and caveat loans.
• Recent clean conduct. Twelve months of on-time payments and tidy bank statements say more about today than a default from years ago.
• A clear cause. Illness, a failed customer, a partner leaving, a dispute. Something specific, finished and explained in writing.
• A believable repayment plan. Especially for short-term loans, the lender wants to know exactly how you’ll repay or refinance.

No property? Then the lender leans on your turnover and bank statements instead, with unsecured and cash-flow amounts usually somewhere between $5,000 and $500,000. We cover how those work in unsecured loans with bruised credit, and a revolving facility is explained in lines of credit with bad credit.

Wondering how your file stacks up? Tell us about it in 60 seconds. There’s no credit check when you first enquire.

How should I prepare before I apply?

Pull your reports first. Each credit reporting body must give you a free copy every three months, according to the OAIC. Check both yours and any co-director’s. Then:

1. Correct anything that’s wrong. It’s free.
2. List every negative item with a date, an amount and a status.
3. Write one plain paragraph on what happened and what’s changed.
4. Gather six to twelve months of business bank statements.
5. If there’s property, note its value, what’s owing and whose name it’s in.

This preparation is exactly what a lender’s credit officer would do. Doing it first means your file arrives answered, not questioned.

What should I avoid?

Avoid the scattergun. Applying to several lenders or lead sites in the same fortnight adds enquiries and can make a moderate file look worse. Avoid hiding anything, too. Specialist lenders will find a judgment or a default on the report, and discovering it late undermines trust faster than the listing itself.

Illustrative example: a mixed file, sorted in order

Illustrative only, not a real client. The owner of a Canberra fit-out business has a paid default from a supplier dispute, a small unpaid judgment from a former landlord, and a handful of enquiries from applying online after the bank said no. The business trades well, and he owns a house with good equity.

A specialist lender offers a property-secured second mortgage behind his home loan, pays out the judgment at settlement, and funds the working capital he needed. The default stays on his report, but it’s paid, explained and no longer the headline.

If your credit problems include a past bankruptcy, see business loans after bankruptcy. If there’s a judgment, see loans with a court judgment.

Find a lender who reads the story

Bruised credit is most of what we do, and nobody here will judge how you got here. It takes about a minute to tell us, there’s no credit check when you first enquire, and your details go to a single team instead of a long line of lenders. Expect a phone call from someone who actually reads the file.

Please be accurate about every credit issue you know of. It’s the difference between a lender who says yes and one who changes their mind at the last minute. See if you qualify →