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• 20 Aug

  How To Get Invoice Financing With Bad Credit In The UK

  How to get invoice financing with bad credit in the UK is addressed in this article. Below are the steps to follow to get approved and the pitfalls to avoid.

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  How To Get Invoice Financing With Bad Credit In The UK

  Everything seems to revolve around credit ratings these days. Therefore, it can feel like you can't get access to business finance if you have bad credit.

  Bad Personal Credit History Or Bad Business Credit History

  However, even if you have a bad personal credit history or your company has bad credit there are still options to get invoice financing for your company.

  Introduction To The Steps To Get Approved

  Below are some steps to help you get approved.

  1) Understanding Invoice Financing

  See our specific product information about invoice financing. It will explain how these services can release cash against your unpaid sales invoices and improve cash flow.

  This can release more money than other forms of funding such as loans.

  2) Challenges of Bad Credit in Securing Financing

  Bad credit can occur if you become insolvent but it can also occur if you miss payments, have too many credit searches in a short period or get into a dispute with a supplier. Sometimes this can lead to a negative impact on your personal or business credit file.

  Why Is Bad Credit An Obstacle?

  Why is bad credit an obstacle to securing financing? Past performance is often the only indicator of future performance. Hence many financiers look at your credit history to evaluate you as a potential risk for future lending.

  If you have a prior bad credit history such as CCJs (County Court Judgements) or prior insolvencies, this can be a problem for many lenders. This can be especially true if you are seeking a business loan or bank overdraft.

  Rebuilding Your Credit Score

  You could seek to rebuild your credit score but that could take a long time and there may be interim financing options available that don't rely on credit standing.

  Related content: If you have been declined by a bank see this article: Alternative finance if declined by a bank 

  Choose Financial Services That Don't Rely On Financial Strength

  Many financing services rely upon the financial strength of the borrower to ensure certainty of repayment. This is not the case for all types of business lending.

  One set of business financing products known as "invoice financing" is predicated on the strength of the book debts rather than your financial strength or that of your company.

  This means that invoice finance companies can often overlook bad credit and still offer business finance despite your negative credit history

  3) Invoice Financing Options for Businesses with Bad Credit

  Our guide to invoice finance gives more detail about the different product types and services. However, a service such as factoring (funding and credit control services) is the most likely to be offered to companies with bad credit - so consider seeking that product.

  The additional control of the funder collecting your sales ledger dramatically improves your risk profile from the funder's perspective. This enables them to offer finance where other services cannot.

  4) How to Improve Your Chances of Approval

  Selecting the right service, such as invoice factoring can be a good way to increase your chances of being successfully getting approved. This product is most widely available even in cases where there is bad credit or prior failures.

  Presenting the funder with a strong proposition is also a great way of improving your chances of approval.

  Tips To Improve Your Chance Of Approval

  Follow these key tips:

  • Present strong invoices for goods or services that can be evidenced as having been provided
  • Deal with credit-worthy customers that pay regularly
  • Keep credit notes and disputes to a minimum
  • Ensure your invoicing format is correct

  5) Choosing the Right Invoice Finance Provider

  Choosing the right invoice finance provider is essential. Not everyone offers funding to companies with bad credit but some take a very sympathetic view.

  Consulting A Broker For Support

  You might benefit from the support of an invoice finance broker who can guide you as to which funders will deal with bad credit situations.

  6) Alternatives to Invoice Financing

  There are of course many other types of funding you could use but many are likely to be difficult to obtain with bad credit.

  Methods that are based on assets rather than credit history, such as stock finance or asset finance, are likely to be easier to obtain.

  7) Case Studies And Examples

  These are some case studies and examples of situations where we have helped companies with bad credit find invoice financing.

  • A case study about getting invoice discounting after a liquidation.
  • Another case where we found business finance for a bankrupt director.

  8) Pitfalls To Avoid

  These are some specific pitfalls to avoid when seeking invoice financing despite having bad credit:

  • Failing to fully disclose your circumstances - any prospective lender will likely find out and this will likely see them withdraw any offer.
  • Seeking the wrong product - seeking products like loans could deteriorate your credit file even further with failed applications. It is better to apply for products that you are likely to be approved for.
  • Failing to choose lenders that deal with bad credit - not all lenders will be able to help but there are specialists in such situations. A broker can guide you.

  See also examples where we helped businesses who were declined for finance.

  Summary

  Whilst it may seem difficult to source invoice financing with bad credit in the UK, there are providers that specialise in helping such cases. The steps above can be followed to improve your chances of being approved and you should also have an idea of the pitfalls to avoid.

  Call us on 03330 113622 for support and introductions to sympathetic funders who will be able to provide UK invoice financing despite having bad credit.

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  FAQ: Invoice Financing with Bad Credit in the UK

  1. Can I still qualify for invoice financing if my business has bad credit?

  Absolutely. Invoice financing is often accessible to businesses with poor credit because the focus is on the creditworthiness of your customers rather than your credit history. If your customers are reliable and have a strong payment track record, lenders are more likely to approve your application. This makes invoice financing a viable option even if traditional loans aren't available to you.

  2. What types of invoice financing are available for businesses with bad credit?

  There are two primary types: invoice factoring and invoice discounting. Invoice factoring involves selling your invoices to a lender who then collects the payments directly from your customers. Invoice discounting, on the other hand, allows you to borrow against your invoices while maintaining control over the collections. The best choice depends on your specific business needs and whether you prefer to manage customer relationships internally or outsource the process.

  Factoring is likely to present the least qualification challenges for businesses with bad credit.

  3. Can my business get invoice financing if we have a County Court Judgment (CCJ)?

  Yes, many lenders will still consider your application even if your business has a CCJ. While having a CCJ might lead to stricter terms or higher fees, it doesn’t automatically disqualify you. The key is to work with lenders who understand your situation and are willing to offer terms that help your business succeed. A broker can help with this.

  4. How quickly can I access funds through invoice financing?

  The process is relatively quick compared to traditional financing methods. Once your invoices are verified, you can typically receive funds within 24 hours. This speed makes invoice financing an excellent solution for businesses that need fast access to cash. Our record is just 7 hours from enquiry to cash in our client's bank account but that will vary by facility type.

  5. Are there additional costs if my business has bad credit?

  Businesses with bad credit might incur slightly higher costs due to the perceived increased risk. These fees are often outweighed by the benefits of improving cash flow, enabling you to pay bills on time and avoid further financial issues. Read more about the costs.

  6. Can using invoice financing help improve my business's credit score?

  Yes, invoice financing can positively impact your credit score. By converting your outstanding invoices into immediate cash, you can pay off debts promptly, which helps in maintaining or even improving your credit rating over time. Regularly meeting financial obligations through improved cash flow is key to rebuilding your credit.

  7. How do I qualify for invoice financing with bad credit?

  Qualification criteria for invoice financing with bad credit will typically focus on demonstrating that your customers are reliable payers. Lenders will evaluate the creditworthiness of your customers, the terms of your invoices, and your business’s overall stability. It's important to have a steady flow of invoices and a solid customer base to improve your chances of approval. Additionally, some lenders might require that your business has been operational for a certain period or that your customers have a history of timely payments.

  By Glenn Blackman