It may be possible, depending on the lender, the asset and what's on your credit file. Because asset refinance is secured on equipment or vehicles you own, some specialist lenders place more weight on the asset's value and the business's current ability to repay than on past credit problems. Nothing is guaranteed, and every lender will still run credit and affordability checks.
Expect terms to reflect the extra risk: costs are often higher than mainstream borrowing, lenders may advance a smaller share of the asset's value, and a personal guarantee is more likely. The asset can be repossessed if you don't keep up repayments, so only go ahead if the business can comfortably afford them.
Why security changes the conversation
An unsecured lender has only your credit record and a guarantee to rely on, so adverse history often ends the application. With refinance, the lender can recover the asset if things go wrong, and the British Business Bank confirms that a refinance lender can take the asset to get back what's owed if payments aren't made. That fallback is why some lenders are prepared to consider applications others decline.
It also means the decision rests on the asset as much as on you. Well-maintained, mainstream kit with a strong resale market, such as excavators, telehandlers, tractors, vans and HGVs, gives a lender more comfort than specialist or fixed equipment. Our guide on how much you can raise against machinery explains how lenders value it.
What lenders look at when credit is poor
"Bad credit" covers a lot of ground, and lenders treat different issues very differently. They'll usually want to understand:
- What happened and when. A missed payment two years ago during a cash flow squeeze is viewed very differently from recent, repeated arrears.
- Whether it's been resolved. GOV.UK explains that CCJs stay on the register for six years, but a satisfied judgment shows lenders the debt has been dealt with. Our guide to business loans with a CCJ covers this in more depth.
- Directors' personal credit. For limited companies and sole traders alike, lenders commonly check the people behind the business as well as the business itself.
- Current trading. Recent bank statements and management accounts showing the business can cover repayments now.
- Existing finance. How much is already owed, and whether current agreements are up to date. Refinancing an asset that's in arrears is harder.
- Past insolvency. Previous company failures or personal insolvency usually narrow the field of lenders considerably.
What terms to expect
Be prepared for the deal to look different from what a business with a clean record would be offered. Typical differences include:
- Higher costs than mainstream asset refinance, sometimes significantly so.
- A lower advance against the asset's value, giving the lender a bigger cushion.
- Shorter terms, particularly on older assets.
- A personal guarantee from one or more directors, making them personally liable if the business can't pay.
- More detailed checks on the asset, such as a physical inspection rather than a desktop valuation.
If the monthly payment only works by stretching the term as far as it will go, that's a sign to pause and look at the total cost.
How to give yourself the best chance
Preparation won't change your history, but it helps a lender see the full picture.
- Check your business and personal credit files for errors before anything else. The British Business Bank suggests asking for quotes rather than making repeated applications, as multiple searches can count against you.
- Write a short, honest explanation of any adverse credit: what caused it, what's changed and how the business is doing now.
- Pull together asset details: make, model, year, serial numbers or registrations, hours or mileage and service history.
- Have settlement figures ready for anything still on finance.
- Bring the business up to date with filings and any arrears you can clear. The British Business Bank notes that filing accounts on time can help a credit profile.
- Our guide to working towards a healthier credit rating has more practical steps.
Warning signs to watch for
Businesses under pressure can be targets for offers that sound too good to be true. Be cautious of anyone who says approval is certain or that no credit search will be made, asking for large upfront fees before an offer is in place, or rushing you to sign before you've read the agreement. Check that any firm you deal with appears on the FCA's register, and make sure you understand who owns the asset during the agreement, especially with sale and leaseback.
If debt is already a problem
Refinancing can ease cash flow, but it isn't the right answer if the business is already struggling to meet its commitments and new borrowing would only delay the problem. GOV.UK lists Business Debtline as a free, independent and confidential debt advice service for self-employed people and small business owners. Talking to them first costs nothing and can help you weigh up whether refinancing makes sense.
How we can help
We're a credit broker, not a lender. Some lenders on our panel consider businesses with adverse credit where there's good asset security and the business can show it can afford repayments. We'll listen to the whole story, tell you plainly if we don't think refinancing is realistic or sensible, and explain the full cost and risks of anything we find, including vehicle refinance, plant and machinery refinance and sale and leaseback. Call us on 01604 355800.
Key takeaways
- Asset refinance may be possible with bad credit because the lender has the asset as security, but approval is never guaranteed.
- Lenders look at what went wrong, when, whether it's resolved and whether the business can afford repayments now.
- Expect higher costs, lower advances, shorter terms and a likely personal guarantee.
- Be wary of anyone who says approval is certain or asks for large fees upfront.
- If debt is already a problem, free advice from Business Debtline can help you decide whether to borrow more.
We are a credit broker, not a lender. Any finance is subject to status and the lender's assessment. This guide is general information, not personal financial, legal or tax advice.
Sources checked
Information checked on . General information only, not financial, legal or tax advice. Finance is subject to status and lender approval.