Can I get invoice finance with poor credit?

Invoice factoring with bad credit can be a viable financial solution for businesses facing credit challenges.

In this arrangement, a company sells its accounts receivable to a factoring company at a discount in exchange for immediate cash flow. Unlike traditional financing, invoice factoring focuses more on the creditworthiness of the invoiced customers rather than the business itself.

This means that even if a business has bad credit, it can still access funds based on the creditworthiness of its clients.

While businesses with poor credit may encounter higher fees or stricter terms, invoice factoring offers a way to bridge cash flow gaps and maintain operations without relying on traditional lending institutions.

It can provide much-needed liquidity to businesses struggling with credit issues, helping them navigate financial challenges and sustain their operations.

What is invoice factoring bad credit?

Invoice factoring with bad credit refers to the practice of utilising invoice factoring services by businesses that have a poor credit history or low credit score. In essence, invoice factoring involves selling accounts receivable to a third-party factoring company at a discounted rate in exchange for immediate cash.

Unlike traditional lending, where creditworthiness of the borrowing company plays a significant role, invoice factoring focuses more on the creditworthiness of the customers who owe payments on the invoices. Therefore, even if a business has bad credit, it can still access financing through invoice factoring based on the creditworthiness of its clients.

This financial tool serves as a lifeline for businesses struggling with credit challenges, providing them with necessary working capital to maintain operations and navigate through cash flow constraints.

While businesses with bad credit may face higher fees or stricter terms, invoice factoring offers a viable alternative to traditional financing, helping businesses sustain their operations and manage their cash flow effectively.

Reasons for a bad credit score

A credit score serves as a crucial indicator of an applicant’s likelihood to secure financing successfully, reflecting their history of financial management. A commendable credit score implies a consistent record of settling debts punctually and entirely. However, various factors can contribute to a poor credit score:

• Payment history plays a pivotal role; consistently repaying debts late or incompletely can significantly impact credit scores negatively.
• Total debt accumulation can also tarnish a credit history; a substantial amount of outstanding debt is indicative of financial strain and can lead to a lower credit score.
• Instances of CCJs (County Court Judgements) or insolvency, such as bankruptcy, reflect poorly on financial management and are detrimental to a business’s credit score.
• How finances are filed is critical; timely and complete submissions to the appropriate regulator, such as Companies House in the UK, are essential. Delays or incomplete filings can cast a negative light on the applicant’s financial responsibility and result in a lower credit score.
• Making multiple hard credit inquiries simultaneously can adversely affect credit scores. Each application for credit triggers a hard credit check, and numerous inquiries within a short timeframe can signal financial instability, impacting the credit score adversely.

Advantages of invoice finance if you have adverse credit

The advantages of using invoice finance if your company has any time of adverse credit such as County Court Judgments or payment defaults can be seen here:

1. Ability to repay credits in full once a facility has been granted
2. You can pay suppliers upfront and request a discount
3. Your suppliers will be confident when they know you have finance in place
4. The business can expand with the knowledge of having finance secured
5. HMRC can be paid on time reducing the risk of further court action
6. Can help prevent any further insolvency procedure

Rebuild your business credit score

The capacity to build up or revamp your credit rating is only one of many advantages to invoice factoring. The cash flow you are able to create from this service will affect your current credit score in a positive way almost immediately.

You can use the funding you get to keep steady over every day working costs as well as to settle any existing obligations. Which once again, will help to improve your overall credit score, meaning you’ll be more likely to qualify for that all important financing further down the road in your career.

Different benefits of Invoice Factoring include free credit and background verification checks, invoice collections and management, and web-based detailing that is accessible 24 hours per day, seven days a week, from anywhere at any time.

Do factoring companies run credit checks?

Yes, factoring companies run a credit check against your customers to ensure they are credit worthy to ensure that they settle their outstanding invoices when they are due.

A factoring company will give you a credit limit against each customer you have so you have a good idea of what a safe trading level you have.

Read more: Pros and Cons of Invoice Factoring

F.A.Q’s

My company has a CCJ can we get Invoice Factoring

Yes, your company can still apply for an invoice factoring facility regardless if it has a CCJ. Lenders may ask for you to agree a repayment plan with the creditor.

I am a director of a company with a poor credit rating can I still apply for Invoice Finance

Yes, directors of Limited Companies that have poor credit personally can still apply on behalf of their business for an Invoice Finance facility.

Will a lender know my business has a County Court Judgment if I apply for Invoice Funding

Yes, lenders credit check the directors of a Limited Company and the Company itself when applying for invoice Funding.

Need further help

If your business is seeking to utilize invoice finance but is hindered by poor credit, don’t let financial challenges hold you back. Take action today by reaching out to us at 01246 233108 or by making an online enquiry.

Our dedicated team specialises in providing tailored solutions for businesses facing credit hurdles, offering a pathway to access the financing you need to thrive. Don’t delay – contact us now to explore how invoice finance can support your business goals despite credit obstacles.