November 18, 2015

Funding Your Small Business Even If Your Credit’s Bad


If you are trying to get a loan to start a business of your own, having a good credit score is an absolute must. That’s pretty much the long and short of it.

If you have a good credit score, your borrowing options are plentiful. But if you have a bad one, you’re going to have a difficult time getting a bank loan, plain and simple.

It’s not something you can run away from either. If you plan on successfully running a profitable business in the future, you are going to have to improve your credit score sooner than later.

However, having bad credit doesn’t mean you can’t fund a business idea, it simply means that you are going to have to get creative.

If you are a would-be entrepreneur with a low credit score, don’t despair. Here are some outside-the-box avenues to investigate when it comes to finding ways to fund your business that don’t rely solely on the help of banks.

Take a Look at Microloans

The Internet is your friend. Do some research to find these so-called “microlenders,” most of which are web-based. There are actually plenty to choose from, so your best bet would be to set aside some time for researching all of the available ones and comparing their rates.

These web-based lenders are very popular with young entrepreneurs, so be sure to check out some small business forums and online communities, where you will be sure to find people who have faced similar circumstances as you have and have stories to tell about who the best microlenders are currently.

Most of these micro-lenders will loan you money in the range of $5,000 – $30,000. It’s won’t be a huge sum, but it could be a good start.

Also, it’s important to note that how you interact with these micro-lenders will reflect on your future credit score. All of these web-based lenders report the payments you are making to credit bureaus. So if you’re paying on time and meeting all of your obligations to them, your credit score is going to reflect that positively.

Locate Grants

There really isn’t anything better than a grant. It’s basically free money. Of course, getting a grant is pretty hard. You are going to have to do a lot of legwork and put many hours of research into this process. But if you do end up landing a grant, it’s definitely time very well spent.

You have probably heard of various services, both online and offline, that help people find grants for a fee. Your best bet is to avoid them, since they often turn out to be scams.

What you should do is look for grant programs that are specific to your business. For example, if you are a technology company, focus on the grant programs that specialize in this vertical.

There are also grant programs that support various demographics: minority business owners, single mothers, veterans and so on.


Crowdfunding is another options that both takes a lot of work and is not necessarily a sure thing. But just like grants, being able to crowdfund your business idea is a spectacular achievement if you are successful.

You can use services like Kickstarter or Indiegogo to create your campaign and pitch your business idea to the people. The great thing about crowdfunding is that you can also reach potential investors through such a program. Not only are regular people checking out these campaigns, so are investors who are looking to find the next great idea to put their money behind.

If you want your crowdfunding campaign to be successful, you’re going to have to put a lot of effort, and a considerable amount of money into it. Your presentation video for your business is crucial, and it’s best to get a professional video team to work on it for the best results.

There’s no denying that putting together a great crowdfunding campaign is a painstaking process, but if you believe your business idea is something that a lot of people are going to find appealing, it’s worth a shot.

Ask Your Friends and Family

One reason that friends and family are more likely to give you money for your business than banks is because they know you better and trust you more. People who know you well are more likely to overlook your woes with bad credit if they know your character and believe that you are worth investing in.

Also, there might be personal reasons behind your credit problems that friends and family will be aware of and understand that banks simply won’t take into consideration. Simply put, if the people who are closest to you believe in you, and more importantly, believe in your business idea, there is a good chance that they will be willing to help you out financially.

If you wouldn’t mind having a business partner, why not look at family members first? Turning your business idea into a family business could be the perfect solution for your predicament, especially if you have family members who are financially able and have the type of corporate experience that could help you get your business idea off the ground.

Getting Your Credit Back on Track

As we have already mentioned, bad credit is not something that is just going to go away over time. You are going to have to work to make it go away.

Once you have secured the money you need for your business, your next big goal needs to be improving your credit score. Here are some things you are going to need to start doing in order to achieve this.

Pay Bills on Time

If you have a history of making late payments, the good news is that banks look more at your recent payment history than your behavior in the past. Not paying bills on time, or forgetting to pay them at all, definitely impacts your credit score negatively. It’s probably one of the biggest reasons your credit score isn’t any good in the first place.

Be Careful with Credit Cards

The best advice is to keep business and personal credit cards completely separate. If you do need a credit card for your business, make sure that you are keeping up with payments. Get one card for your business and make sure that you are paying your bills promptly every single month.


Once you improve your credit score, you might want to try getting a bank loan again to further support your business endeavors. The first thing you should do is incorporate your business. This gives your business a great sense of legitimacy in the eyes of the bank.

There’s a much greater chance that a bank will give you a loan if you have an incorporated business and all of the bills for phone, electricity and other utilities are being paid in the company’s name compared to running a freelance style business from your home.