The best business loans for bad credit: our 2026 verdict

A default from a rough patch three years ago. A few late payments during a slow winter. A tax debt that got away from you. Credit marks are common among business owners, and they don’t automatically mean no. They mean the lender needs more comfort from somewhere else, and you need to tell the story well.

How long do credit marks last?

The OAIC sets out what stays on a credit report:

• Credit enquiries: five years.
• Defaults: five years.
• Repayment history information: two years.

Older marks generally matter less than recent ones, and a pattern of clean conduct since the problem helps.

Before you apply, check your own report. Moneysmart explains you can get a free copy of your credit report from the major agencies, and you’re entitled to one free every three months. Check for errors; they happen.

Which structures work best with credit marks?

Structure	Fit with credit marks	Why
Property-secured term loan	Strongest	Security offsets credit concerns
Caveat or short-term second mortgage	Strong for short needs	Focus on equity and exit
Asset finance	Moderate	The asset helps; marks still assessed
Unsecured loan	Harder	Relies more heavily on credit and statements
Line of credit	Harder	Ongoing facility; lenders cautious

Our verdict

Property-secured lending wins because the security gives the lender comfort the credit file doesn’t. For owners with equity, it’s usually the widest door. Read the best loan when you own property.

Caveat loans suit short, defined needs, such as clearing a tax debt before a sale settles. See our caveat loan verdict.

Asset finance can work without property, especially for newer vehicles and equipment, though the marks are still weighed.

Unsecured lending is harder with serious or recent marks, but minor or older issues with strong recent statements are often considered.

Tell us about the marks and what caused them. A specialist can tell you where you’re likely to fit before any formal application.

Illustrative example: a default from a failed partnership

Illustrative only. A builder has a default from a supplier account in a partnership that ended four years ago. His current business has two years of clean, growing statements. He owns a home with equity.

He discloses the default upfront with a short explanation. A property-secured loan funds a new ute and working capital for a larger job. Once the default drops off his file, he plans to review the facility.

Verdict for this owner: property-secured, disclosed upfront.

How do you present credit issues well?

1. Get your report first so nothing surprises you.
2. Explain briefly and factually: what happened, when, and why it won’t recur.
3. Show what’s changed: clean recent statements, a payment plan in good standing, a new system for tax.
4. Don’t apply everywhere. Each formal application can add another enquiry.
5. Deal with ATO debt. The ATO may report business tax debts of $100,000 or more overdue by more than 90 days if you’re not engaging. See the best way to pay off an ATO debt.

If several debts are behind the marks, our guide to consolidating business debts may help. If the bank has already said no, see the best loan when the bank said no.

What if the marks are wrong?

Credit reports contain errors more often than people expect: a debt that was paid but still shows as overdue, an enquiry you never made, an account that isn’t yours. If something looks wrong:

1. Contact the credit reporting agency or the credit provider that listed it.
2. Explain the error and provide evidence, such as a payment receipt or closure letter.
3. Ask for it to be corrected.

The OAIC’s guidance on credit reporting explains your rights to access and correct your credit information. Fixing an error before you apply can change the outcome entirely.

Which marks matter most to lenders?

Not every mark is equal. Lenders generally weigh:

Mark	How it’s usually viewed
A few late payments, now up to date	Minor, especially if older
A paid default	Better than an unpaid one; still visible for five years
An unpaid default	Significant; paying it helps
Court judgments	Serious; explanation and resolution matter
ATO debt on a plan, in good standing	Considered case by case
Defaulted ATO plan or reported tax debt	Serious, but property security often helps
Recent multiple enquiries	Can suggest stress; avoid applying everywhere

The trend matters as much as the marks. Clean conduct since the problem, steady recent statements and a clear explanation can turn a borderline application into an approvable one.

What is the best business loan for bad credit?

Our pick is a loan secured by property, where you or a director own property with equity. Security changes the conversation: the lender’s main question shifts from “will this borrower pay?” to “is the asset enough if they don’t?”, and a past default matters far less. A second mortgage or a short caveat loan both fall into this group, and the right one depends on how long you need the money and how you’ll repay it.

The runner-up is asset finance, when the money buys a vehicle or piece of equipment. The asset carries its own security, so the lender is less reliant on your file. Our third choice, for trading businesses without property, is a modest unsecured facility sized well inside your turnover, with a clear explanation of the marks.

What we’d avoid: a run of short-term online advances, each taken to keep up with the last. That pattern turns a credit problem into a cash-flow problem very quickly. If you are already there, read our verdict on consolidating business debt.

Bad credit business loans compared

Structure	Security	How credit marks are viewed	Best when
Property-secured loan	Residential or commercial property	Fair: equity carries most of the weight	You own property and need a meaningful sum
Asset finance	The vehicle or equipment	Fair: the asset softens the focus on your file	You’re buying something with resale value
Unsecured loan	Director guarantee	Weak: statements and history do all the work	Marks are older and deposits are steady
Line of credit	Guarantee, sometimes property	Weak to fair, depending on security	Cash flow is uneven and marks are minor

Does a bad credit business loan cost more?

Usually, yes, because pricing reflects risk and every loan is priced on the borrower’s circumstances. The gap narrows when you offer good security, show clean conduct since the problem, and keep the amount in proportion to what your bank statements can carry. The best way to see the real difference is in dollars: put any offer through the total cost comparer, and if it’s quoted as a factor, convert it with the factor rate calculator first.

It is also worth asking how long you need the money for. A higher-cost facility for a short period, followed by a refinance once your file has recovered, can cost less overall than locking in a long term at today’s pricing. Plan the exit before you sign.

Marks on your file? Let’s talk honestly.

Start a confidential enquiry. Tell us what’s on your file, what caused it and what you need now.

Enquiring won’t add a credit check, and your story stays with one specialist instead of being sent to a lineup of lenders. The more candid you are, the more likely the first option we discuss is one that can actually go ahead.