Scottish Pacific

Access to capital is vital to your company's growth and sustainability. You need it for purchasing inventory, buying equipment, hiring employees and boosting marketing efforts.

Unfortunately, many businesses face a shortage of capital. In fact, nearly two-thirds start with less than $70,000 AUD.

If you've got good personal credit, that's great. You'll likely have several options and shouldn't encounter much difficulty obtaining a business loan.

But what if you have not so good personal credit?

Are there other ways to get the financing you need? If so, what are some specific workarounds?

Let's find out.


First, it's important to know which specific factors look at when receiving a funding request. This offers insight into their decision-making and helps you better understand their logic.

There's obviously your credit score, and nearly all lenders will check this. In Australia, you can go through credit bureaus like Experian and Equifax to see what your score is.

Here's how these break down according to Finder:


800 - 1000 - Excellent

700 - 799 - Very good

625 - 699 - Good

550 - 624 - Fair/Average

0 - 549 - Weak/Below average


833 - 1200 - Excellent

726 - 832 - Very good

622 - 725 - Good

510 - 621 - Fair/Average

0 - 509 - Weak/Below average

If your credit score is 549 or under with Experian or 509 or under with Equifax, it would generally be considered poor. Falling into this range means that you're in the bottom percentage of the credit-active population.

While your credit score is important, it's certainly not the only thing lenders look at. Here are some other factors they examine.


The longer your company has been around, the better your chances of obtaining a business loan typically are. Brand new startups tend to have more difficulty than those who have been around for at least 2 years.

In some cases, it can be nearly impossible to get a loan if you're just starting out, even if you have a good credit score.


There are 2 main elements involved with your debt-to-income ratio. One is your business's cash flow and income. The higher these are, the less of a risk you are to lenders, and the more appealing you'll be.

The other is the amount of debt you have. If your company has taken on a lot of debt, the less appealing you'll be to lenders, and you'll have more difficulty getting a business loan.


If you can back your debt with substantial collateral such as your home, commercial property, equipment or outstanding invoices, it reduces your level of risk. In turn, collateral-based loans can be easier to obtain and may involve lower interest.


Finally, there's industry.

"The type of industry your business falls under can be a deciding factor for many lenders," explains digital marketing strategist Brooke Hayes. "And in some cases, they may lean away from certain industries that are considered risky. In fact, businesses deemed to be socially undesirable or that have an unsteady cash flow tend to be rejected most."

A seasonal business, for instance, may have difficulty getting a business loan due to the inherent ups and downs throughout the year. Those selling alcohol or sexual health products often get denied as well because of the social stigma of their products.


The point here is that lenders look at many different criteria. Having good personal credit is always beneficial and makes it easier to obtain a business loan. But having poor credit won't necessarily disqualify you from accessing capital.

So the short answer to the question, "Can I take a out a business loan with bad personal credit?" is usually yes. However, it will probably narrow down your options, and you'll likely need to explore some different avenues.