Long-term loan with no guarantor bad credit

What if you cannot pay back a bad credit business loan?

A business loan is one of the most common ways to finance the operations and employees’ requirements. 

What happens to your business loan if it does not take off as hoped? 

It can be challenging to pay off a new loan and take the business to new heights amid liabilities consuming most profits. In missed payments, a business receives constant emails and reminder letters with mounting interest and other costs.

You face the consequences if you cannot pay a bad credit business loan. The blog talks about the latter part of the non-repayment of business loans.

Here is what happens if you cannot pay a business loan.

Late fees enforcement and credit loss

If you cannot pay the loan, the authority may enforce late fees, missed payment fees, default fees, and administration fees. A loan enters default when you miss payments for 6 months in a row. If this happens, the credit drops. You may struggle to qualify for better interest rates on a long-term business loan until it improves.

Seizure of personal and business assets

A business generally applies for a secured or unsecured loan. Here is what happens if you default on either:

a)     Secured Business Loans

A secured loan is when you borrow against any business asset. The asset works as a safety net for the lender. If a business defaults on a secured loan with an outstanding amount, the lender may recover it by claiming the asset.

 The asset can be anything from a commercial vehicle, machinery, or equipment to office space. Most businesses opt for this option to qualify for a higher sum at low interest despite the bad credit. It is a long-term loan that one can get with no guarantor and a bad credit score.

b)     Unsecured business loan


If you apply for an unsecured business loan for your needs, you provide a personal guarantee agreement. It is important if you have low credit history and limited revenue. In such a case, a responsible lender may ask for proof of repayment.

 In this, either one of the business partners agrees to pay the remaining amount, or the lender claims it through business and personal assets mentioned in the agreement. A personal guarantee also means a guarantor in the form of business owners and assets work as a guarantee.  The only way to get out of the situation is- to negotiate the terms.

We are always open to helping you with unsecured and secured business finance. As a responsible lender, we can halt the proceedings to retrieve the cash loss if you act quickly and discuss your financial situation.

Lender issues a County Court Judgement (CCJ)

The lender chases the debtor in writing initially. He sends warning letters stating the additional charges that will apply if the borrower fails to pay. They also contact the debt collector agencies and inform them about the default.  Debt collection agencies also contact the business through letters or in-person meet.

If the business does not respond to any, the lender issues a CCJ against the business.  A CCJ is a legal notice that initiates court proceedings for the borrower to clear the lender’s dues. It remains on a credit report for 6 years and limits the chances for loans for the time being. The court grants you a time limit to pay the dues. If you fail to do so, the lender may rightfully claim security to recoup their loss. The lender cannot proceed without a nod from the court.

And in the case of unsecured loans, the business owners may go bankrupt. It is an exceptional situation where the business’s liabilities exceed the assets by a good number.

These are some probable consequences of not paying the business loans. However, you can avoid the situation and safeguard your business and personal assets.

What action should you take if you miss business loan payments?

As you can see, defaulting on business loans can have dire consequences.  In some cases, it can impact your well-being.  Here are some steps you can take to avoid default and take control of your finances and loan repayments:

1)     Contact the lender and discuss your issues

It is one of the most important tasks as you fall on loan payments. If you know that your business may not generate enough sales to pay the next repayment, tell it to your lender. Delaying will only lead to additional fees like- late payments and increased interest rates. 

You can contact us to discuss your business flow issues and manage repayments. We help you ensure a personalised repayment setup. If you want, you can rationalise payment holiday for 2 months. Your business must improve in productivity within that period.

2)     Act out a settlement amount

If both creditor and you agree on a specific amount than the actual amount, it is known as a settlement. Many may agree due to fear of losing the whole amount or engaging in court matters.  For example, if the outstanding amount is £25000, they may agree upon £20000.

However, it may appear on the credit report but would not be considered a default.

  • Try invoice financing

If you have any pending projects you are working on but may get delayed in receiving client payment, utilise them. Yes, you can leverage it if you are confident about the client paying back. If you have any new invoices yet to be paid, these invoices as collateral to pay the dues. However, not every lender agrees, as clients may or may not pay.

4)     Refinance the loan

It is one of the best ways to try if your consequences allow. It is ideal for a business with limited loans to pay. You may benefit from a new refinance agreement with lower interest rates and payments. It may help you clear the loan quickly. If the total amount after refinancing is still higher than you can afford, it may not be beneficial.

  • Negotiate a Company Voluntary Agreement

CVA is a formal insolvency procedure that rids you from paying the debtors now. It grants you sufficient time to start from scratch and build your finances. A licensed insolvency practitioner draws a repayment proposal for the creditors. If your creditors agree, you can rationalise the flexibility to pay the dues within 2-5 years. During this phase, the business can operate regularly. No creditor or other authority can take action against the business during this phase.

Bottom line

If you have experienced or are undergoing the same phase, the tips may help. Discuss the loan repayment situation with the loan provider before taking action.  It may help you decide right and pay the dues on business loans strategically and without impacting your well-being.

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