How to Start a Very Good Business With Very Bad Credit

You have an amazing business idea that you know will transform you into an incredibly successful entrepreneur, and all you need is a starting loan. To acquire most small business loans, your personal credit needs to be good, at least higher than about 640 though 700 or above will give you access to the full range of business loan options.

However, if you have a few financial mistakes in your past, you might not have such healthy credit. Is it possible for you to get your small business idea off the ground if your credit score is low?

Yes, You Can Fund Your Small Business

Once your small business is up and running, it will develop a credit history of its own — but until then, your personal credit is a significant component of the information lenders can use to determine your trustworthiness. Thus, if your personal credit score is low, you might assume that you will be utterly unable to acquire small business loans to fund your entrepreneurial dreams.

The truth is that, even with poor credit, you might be able to secure some loans for your small business. You might need to meet with several different lenders to find one that is willing to work with you. As you engage with interviews, you should be honest and transparent about your credit history, but you should also be enthusiastic and knowledgeable about your business plans. You might also take steps to demonstrate to lenders that you have developed more responsible financial habits, such as participating in credit counseling, which can help you eliminate your debts and start building stronger credit into the future.

Alternative Funding Options

You should not expect to earn massive small business loans with enviable terms if your personal credit is poor. If you are unable to secure enough initial funding to get your small business off the ground, you may need to supplement your loans with money earned in other ways. Here are a few of the most popular methods of business funding used by entrepreneurs with bad credit like you:


If you are consistently turned down by traditional lenders, like banks, you might turn to micro-credit organizations, whose entire purpose is to help entrepreneurs and business leaders secure funding. Micro-credit organizations — also called micro-finance institutions, depending on their location — provide small loans to help build small businesses, especially in developing and marginalized communities. These organizations are often backed by well-funded non-profit groups interested in providing a financial boost to those in need.

Social Lending

Social lending, also called P2P lending, involves people borrowing from and lending to one another without a bank or financial institution working as an intermediary. There are many social lending websites to work through, such as Upstart, LendingCLub and Funding Circle. Like other forms of lending, social lending will look at your credit history, but many investors will be more interested in your story and dreams than in the hard financial facts of your past. Technically, money received through social lending is considered personal loans, but you can use it to launch your business.

Purchase Order Financing

Once your small business is in operation, you will be generating financial assets that you can leverage to secure better financing. One of the most common methods used by new business owners to increase their available capital is purchase order financing, which involves promising some of all of the income from an ongoing purchase order to a lender who can provide that money to you now. In doing so, you improve your cash flow, which could help you bid on more jobs and grow your business.

Business Grants

Most national governments are deeply invested in growing and supporting small businesses. Various business grant programs exist to stimulate the economy and ensure that business leaders of all backgrounds have the financial support they need to thrive. Even better, some grants are given specifically to entrepreneurs with bad credit. You can research available government and private grants in the U.S. online. 

No matter what your credit score is, with some creativity and diligence, you can find funding for your small business idea.

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