How to get a business car lease with bad credit

Why do you need good credit for a business car lease?

Like any other form of credit for personal or business reasons, finance companies want to verify that you can comfortably afford the agreed-upon payments. To ensure this, funders will run a check on your previous credit history.

A credit check is essential for anyone seeking to secure credit, and the Financial Conduct Authority (FCA) requires one for a business car lease. The stronger your company's history, the easier it is to secure the credit your business needs, so effective financial management is essential.

What credit score do I need to take out a business lease?

Most finance companies require a good or excellent credit score to approve an application. But business leasing may be possible with bad credit, depending on your circumstances.

How can I find my credit score for a business lease?

You can easily see whether you’re likely to be accepted for a business car lease application using the handy Leasing Options eligibility checker. Otherwise, for a more detailed breakdown of your financial history, many credit reference companies can help you check your score for free, as well as provide tools to help improve it. These services include:

• Experian
• Equifax
• TransUnion
• Credit Karma

Can I take out a business car lease with no credit check?

No, it is not possible to get a business lease without a credit check. This check is designed to protect both you and the lender and ensure you can meet your financial obligations.

While some companies may not require as extensive a financial report to provide a business lease, submitting to a credit check is still mandatory, regardless of the provider.

What is shown on a company credit report?

Each financial company has its own process when considering your application, but all of them will review your business credit report to inform their decision. Here is some of the most important information a funder may look at from your report:

• Companies House accounts and trading history (previous three years)
• Business bank accounts
• Company registration (if you have one)
• Management accounts if trading accounts are unavailable
• Any prior credit limits, mortgages and loans
• Information related to any current account overdraft
• Missed or late payments related to outstanding credit, and how many times
• Highlighting any financial links to other people
• Up to six years' worth of information related to bankruptcies, CCJs or debt issues
• Whether your company identity has been subject to fraud
• Details of the company director/owner

Sometimes, directors and owners may need to provide additional documentation to verify their identities. If you use your name, such as a sole trader, for the business lease, a personal credit check may also be required.

What documents do I need to take out a business lease?

As well as your business or personal credit report, funders will generally need the following:

Necessary documents

• Proof of identity (business owners and directors)
• Company registration number and address
• 3-6 months of business bank statements
• Up-to-date financial statements (proof of annual net income)
• Names/addresses of director(s)

Documents that may be required

• Management accounts (if available)
• Opening balance sheet (if available)

New companies may also need to offer more account and financial information.

Can a new business without credit lease a car?

All businesses can apply for a car lease, regardless of how long they've been trading. However, as your company's accounts and credit history are new, the company directors or owners may require a credit check to support the application.

But how long does it take to build a good business credit score? A good credit score can take around two to three years to build up if you're a new company. This may affect your credit applications when you start up.

There are options for new businesses looking to secure a car lease, including:

• Choosing a shorter lease – Opting for a shorter term lowers the risk to the finance company.
• Higher initial payment – Paying a larger amount at the start of your lease helps to reduce the monthly instalments over the rest of the contract.
• Use a guarantor – A guarantor takes responsibility for the payments if your business does not meet them. However, as a director of a company, you can also act as a guarantor and personally take over payments if your business cannot.

Learn more about leasing as a new company in our new business leasing guide.

How to improve your chances of being accepted with bad credit

All financial documents should show that you can comfortably afford the lease payments. If your monthly payments are affected by bad credit, there are a few ways that you can improve your company's score.

Check your credit report

The first step is to review the same credit report that the financial company has seen. This can be obtained for free from providers such as Experian and Equifax. Make sure all information is correct, and if there are any mistakes, point them out so they can be corrected. Regularly checking your credit report also helps identify fraudulent activity, allowing it to be resolved sooner.

Keep your current account in credit

Wherever possible, avoid falling into the overdraft, and if you have any old business accounts that are lying dormant, it's best to close them if they are not likely to be used in the future.

Get a credit card

If your credit is good enough to get one, you could consider using a credit card to boost your score. This means ensuring the balance is always paid off each month, along with any charges.

Cards with 0% introductory rates are often the best starting point, but always check when the initial rate ends. Ensure you can afford this before getting one, as being unable to pay your debt will only worsen your credit score.

It’s also important not to max out your credit cards. Your credit score takes into account your credit utilisation, which is the percentage of your available credit you use. Keeping this as low as possible will help maintain a healthier credit score.

Keep on top of bills

Pay all of your company bills on time and ensure they are in your business’s name. Change to using direct debit wherever possible, as this makes it easier to pay on time while also helping your credit score.

Cut down on applications

Every time you apply for credit, it leaves a ‘footprint’, showing future providers that other companies have previously rejected you. If you believe you are unlikely to secure the line of credit, then it is best to avoid applying until your credit score has improved.

How long will it take to improve my business credit score?

What must be remembered is that your credit history is not something you can rectify in a few days or weeks. The minimum amount of time you will need to see a noticeable change to your credit rating will be several months.

While this may seem like a long time, if your credit history only needs to be improved slightly, it can really benefit your business in the long run.

I'm a director with poor credit, can I still take out a lease?

Yes, it might be possible to obtain a business lease even if you have poor personal credit. Opting for a business lease means the finance company will predominantly look at your business finances and income instead of your personal financial background.

If your company's credit check and supporting documents demonstrate that you can comfortably afford the monthly instalments, you are more likely to succeed with a business lease.

Find your dream business car lease with Leasing Options

Ready to get started on the journey to securing the perfect vehicle lease for your company? Check out Leasing Options’ full range of business car leasing deals, with models from all the top car manufacturers worldwide to suit your preferences.

If you still need advice on your lease, don’t worry. Head to our business leasing hub for more helpful guides. You can also learn how to lease a personal vehicle with poor credit if you’re looking for a car to suit your everyday needs, or read our guide on van leasing with bad credit if you need a larger vehicle.