Can I get a business loan with bad credit?

Mr has met a lot of good operators with a rough patch in their past: a phone bill that went to collections during a divorce, a supplier default from the lockdown years, a first business that didn’t make it. None of those, on their own, should stop a sound business from getting funded. What matters is the whole story and what’s changed since.

What counts as “bad credit” to a business lender?

It’s a broad label. In practice lenders look at a mix of:

• Payment defaults — debts more than 30 days overdue that were referred to collection.
• Repayment history — whether loans and credit cards have been paid on time recently.
• Credit enquiries — how many times you’ve applied for credit lately.
• Court judgments, insolvency or a past liquidation of a company you ran.
• Business-side signals — company tax debt, dishonours on your business account.

Not all of these weigh the same. A single old, paid default for a utility bill is very different from a string of recent unpaid ones.

How long do problems stay on my file?

According to Consumer Protection, payment defaults can stay on your credit file for five years, even after the debt is fully paid. That surprises people. The upside is that lenders can see the default is paid, which tells a better story than one that’s still open.

There’s also a newer business-side signal to know about. Since changes Inland Revenue announced in 2026, it can share information about significant company tax debt with approved credit reporting agencies. We explain the thresholds on can IRD tell credit bureaus about my tax debt?

Should I check my own credit report first?

Yes — Mr insists. There are three credit reporters in New Zealand: Centrix, Equifax and Experian. Each keeps its own file, and each must give you a free copy on request, normally within 20 days.

When you get them:

1. Check every default and enquiry is actually yours.
2. Note the dates — older matters weigh less.
3. Ask for corrections if something’s wrong.
4. Pay off anything small and outstanding if you can; a paid default reads better.
5. Write a two-line explanation for anything that remains.

Which options are realistic with bad credit?

Situation	What’s often realistic
Old, paid defaults; steady trading	Unsecured options may still be possible
Recent defaults; property with equity	Property-secured loans are usually the stronger route
Past liquidation; new business trading well	Case by case; property security helps a great deal
Recent defaults; no property; new business	Harder — build history first, or bring in a supporter’s security

Property security changes the conversation because the lender relies more on the equity and the exit than on your past repayment record. Property-secured business loans range from $20,000 to $5,000,000. Read secured or unsecured? for the trade-offs.

If you want to know where you stand right now, ask a specialist — there’s no credit check to start.

What makes a lender more comfortable?

• Honesty up front. Lenders find everything eventually. Telling them first builds trust; being “found out” ends conversations.
• A clear reason it happened. Illness, a failed customer, a relationship ending, a pandemic year — real life.
• Evidence it’s behind you. Recent clean repayment history, paid defaults, IRD under an arrangement.
• A sound business today. Steady deposits and a sensible plan for the money.
• A realistic amount. Asking for what you need, not the maximum.

What should I avoid?

Don’t apply everywhere at once. Each formal application can leave an enquiry on your file, and Consumer Protection points out that a cluster of them can make you look like you’re chasing more credit than you can afford. One careful application, matched properly, is better than ten hopeful ones. That’s exactly why we don’t send enquiries out to a crowd of lenders.

An illustrative example: two defaults and a good business

Here’s an invented case to show how a lender might weigh things.

Tama runs a landscaping company in Hamilton. Four years ago, during a relationship break-up, two personal accounts — a phone contract and a credit card — went to collections. Both have since been paid. The business has traded steadily for three years, GST is filed on time, and he owns a home with his partner. He wants to buy a second truck and trailer before the spring rush.

How a lender is likely to read it:

• The defaults are old and paid. They’ll still show on his file until five years from when they were listed, but a paid default with a clear explanation is far less worrying than an open one.
• Recent behaviour is clean. No new defaults, no missed loan repayments, tax up to date.
• The business is sound. Steady deposits and a sensible, specific purpose.
• Property is available. If his partner agrees, with independent legal advice, a property-secured option is likely the strongest route. An unsecured option may also be possible given the clean recent record.

What helps Tama most: pulling his three free credit reports first, writing two lines about what happened, and bringing evidence the defaults are paid. That turns an awkward conversation into a short one.

What “case by case” really means

When Mr says bad credit is considered case by case, he means the lender asks:

1. What happened, and when?
2. Was it business or personal, and was it in the owner’s control?
3. Has it been resolved?
4. What’s the record been since?
5. What does the business look like now?
6. What security and exit are on offer?

Three good answers out of six is often enough to keep the door open. Six good answers usually means the old marks barely matter.

Tell us the real story

Bad credit is one of the most common things people ask Mr about, and it’s always looked at case by case. Tell us what happened, roughly when, and what your business looks like now. Asking doesn’t involve a credit check, your details stay with the person handling them, and a real specialist will ring you.

Please be accurate on the form, including the awkward bits. It’s the quickest way to land on an option that will actually go through. Ask about borrowing with bad credit.