Can you get a merchant loan with bad credit?

If you have been turned down for bank finance because of a poor credit score, you are not alone. Thousands of UK businesses with CCJs, defaults, or thin credit files struggle to access traditional lending. A merchant loan works differently.

Because merchant loan approval is based primarily on your card transaction revenue, your credit history takes a back seat. If your business processes consistent card payments, you are likely to be approved regardless of your personal credit score.

Why credit score matters less for merchant loans

Traditional lenders use your credit score as a proxy for risk. They want to know whether you are likely to repay based on your past financial behaviour. Merchant loan providers take a different approach.

Instead of relying on credit scores, they look at your actual card transaction data. Your daily card revenue shows them exactly how your business is performing right now, which is a much better indicator of your ability to repay than a credit score that may reflect events from years ago.

Situations where you can still get approved

Merchant loan providers regularly approve businesses with the following credit issues:

• County Court Judgments (CCJs) on your record
• Previous loan defaults or missed payments
• A thin credit file with limited borrowing history
• Previous business insolvency (if trading under a new entity)
• High personal debt-to-income ratio
• Being declined by banks or traditional lenders

What providers look at instead

Instead of your credit score, merchant loan providers assess:

• Your monthly card transaction volume and consistency
• How long you have been trading and processing card payments
• Your industry and typical revenue patterns
• Whether you have existing merchant loans or advances
• The stability of your card revenue over the past 3 to 6 months

Tips for improving your approval chances

If you have bad credit and want to maximise your chances of approval:

• Apply when your card revenue is at its strongest
• Provide as much card processing history as you can
• Be upfront about any credit issues rather than trying to hide them
• Apply with providers who specifically work with bad credit businesses
• Avoid applying to multiple providers simultaneously, as this can raise concerns

Will applying affect your credit score further?

Most merchant loan providers use soft credit checks, which do not leave a visible mark on your credit file and do not affect your score. This means you can apply without worrying about making your credit situation worse.

If you are concerned, ask the provider what type of credit check they perform before you submit your application.

Frequently asked questions