What Is the Difference Between Invoice Factoring and Invoice Discounting?

Right, let's cut through the panic first, because I get asked this constantly and the anxiety is nearly always bigger than the actual problem. You've got a default, a missed payment, maybe a CCJ from a few years back, and you've convinced yourself that's it, game over, no lender will touch you.

It isn't game over. In fact, for commercial mortgages specifically, adverse credit is far less of a dealbreaker than most people assume. Let me explain exactly why, and exactly what you need to do about it.

The short answer

Yes, you can often get a commercial mortgage with adverse credit. Not always, and not from every lender, but "often" is doing a lot of work in that sentence, and it's the honest answer.

Here's the key thing to understand: commercial mortgage lenders don't work like the high street mortgage machine you might be used to. They're not running your file through a computer that spits out a flat "no" the second it sees a default. Many of them are actively set up to look past historic credit problems, provided the rest of the deal stacks up.

Bank of England held base rate at 4.25% in June 2026 - waiting for inflation to cool.

73% of UK SMEs expect to grow in the next 12 months - confidence remains strong.

Why commercial lenders think differently

With a residential mortgage, a huge chunk of the decision comes down to you personally - your income, your credit file, your affordability. Commercial lending shifts a good chunk of that weight onto the deal itself: the property, the deposit, and crucially, your exit strategy or the income the deal will generate.

So a lender might look at a five-year-old default and think: that's history. What matters more right now is whether this deal makes commercial sense. That's genuinely how a lot of specialist lenders approach it.

What actually counts as "adverse credit"?

It's a broad umbrella, and lenders don't treat everything under it the same way. It typically includes:

• Missed or late payments

• Defaults

• County Court Judgments (CCJs)

• Debt Management Plans

• Individual Voluntary Arrangements (IVAs)

• Historic bankruptcy

• Mortgage or loan arrears

A default from eight years ago that's been fully repaid is a very different conversation to a CCJ registered last month that's still outstanding. Lenders look at the detail, not just the label.

Will it affect your rate?

Probably, yes, and I'd rather tell you that straight than have you find out later. Adverse credit generally pushes your pricing up a bit, because the lender is taking on more perceived risk.

But - and this is the bit people miss - it's only one ingredient in the pricing, not the whole recipe.

Your rate will also depend on:

• The property's value and how much you're borrowing (your LTV)

• How strong your exit strategy or income cover is

• The type of property

• How recent the credit issue actually was, and why it happened

A strong deal with an old, explained credit blip can still land a genuinely competitive rate. Don't assume adverse credit automatically means you're paying through the nose.

My top tip: be upfront, every single time

I cannot stress this enough. Never, ever hope a credit issue slips through unnoticed. It won't. Every lender runs credit checks, and if something surfaces halfway through your application that you didn't mention at the start, you've just made your broker's job much harder and dented the lender's trust in you at the worst possible moment.

Tell your broker everything on day one. The default, the CCJ, all of it. A good broker isn't there to judge you, they're there to find the lenders who are comfortable with exactly your situation, and steer you away from the ones who aren't. That's literally the job.

Does every lender accept adverse credit?

No, and that's completely normal, don't take a decline personally. Some lenders have a very low tolerance for credit issues. Others have built their entire proposition around being comfortable with exactly this kind of case.

This is where working with a broker who has access to a wide panel really earns its keep. You're not betting everything on one lender's opinion of you. You're being matched with the handful of lenders out of dozens who are actually likely to say yes.

Can recent bad credit still enable a ommercial mortgage?

Sometimes, yes. It depends heavily on context. Was it a one-off caused by illness, a business hiccup, or a delayed property sale? Or is it part of an ongoing pattern? Lenders will dig into the "why," not just the "what." Context can turn a shaky-looking file into a perfectly explainable one.

What can you do to strengthen your chances?

A few practical, sensible steps:

• **Be honest** from the very first conversation. Always.

2. Get your paperwork ready early - accounts, bank statements, ID, the lot.

3. Have a clear, credible exit strategy or income story, because that carries real weight.

4. Don't over-borrow. Ask for what you genuinely need, not the maximum someone might offer.

5. Use a broker who deals with adverse credit cases regularly, not one dabbling in it occasionally.

None of this erases your credit history. It just makes the rest of your application considerably stronger, which is what actually moves the needle.

The bottom line

Adverse credit doesn't slam the door shut on a UK commercial mortgage. Far from it. Specialist lenders look at the whole picture: your credit history, yes, but also the property, the deposit, and how solid your repayment plan is.

Don't talk yourself out of applying before you've even had the conversation. Be upfront, get matched with the right lender for your circumstances, and let the deal speak for itself. That's always been the better strategy than assuming the worst and never picking up the phone.

Disclosure: Money Pilot Ltd (FRN: 968705) is an Appointed Representative of Yellow Stone Finance Group Ltd which is authorised and regulated by the Financial Conduct Authority (FRN: 814533). Yellow Stone Finance Group Ltd is a credit broker not a lender. Money Pilot Ltd is Registered in England and Wales No: 13621432. You should always make sure you are able to afford any repayments as late or missed payments can affect your credit rating and access to future finance.

YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT.