How to Start a Business When You Have a Bad Credit Rating

A bad credit score can seriously hold you back if you need capital to start a business. Unfortunately, it takes time to repair a credit score. It is unlikely to miraculously repair itself overnight either, so if your start up business idea just can’t wait, here are some options to help you find credit.

Bank Loans

To find working capital as an entrepreneur, you are going to have to think outside the box. The accepted method of financing for a new business is to approach your bank for a business loan. 99.9% of the time, a bad credit rating will scupper your chances. If you still like the security of using a traditional lender for start-up finance, look for a lender that specialises in bad debt loans, such as

Home Equity

If you own a property, you may be able to access credit using your home as collateral. This will only work if there is sufficient equity in the property. It is also a high risk strategy, as the lender will claim the property if you default on the loan repayments. Only go down this route if you are 100% certain your business idea is a safe bet.

Loans from Friends and Family

Friends and family are a useful source of start-up capital. Since they love you, it is only natural that they want you to succeed. Your poor credit score will be less of an issue as long as you can prove the viability of your business venture. If you decide to borrow money from friends and family, make sure you have a proper loan agreement drawn up by a lawyer. Otherwise, any misunderstandings further down the line could lead to a major bust up.


Crowdfunding is a relatively new way to raise start-up finance. The risk to investors is lower because no one person invests a huge amount. All you have to do is register with one of the big crowdfunding websites and make your case. If investors like the cut of your cloth, they will put their money where their mouth is. One thing you need to remember, however, is that investors will want a return on their money.

Grants and Freebies

Don’t forget to investigate the possibility of applying for grants and bursaries. There are lots of government grant programs for small businesses and young entrepreneurs, but unless you go looking for them, you might not be aware they even exist. Free money is not something to turn down. Don’t forget to take advantage of other freebies, too. If someone offers you free office space or the benefit of their business acumen, don’t turn it down as every little helps.

Whatever type of start-up finance you apply for, you will need to have a cast-iron business plan with at least three years of cash flow projections. Potential investors will not be keen to lend you money if there is little evidence the business is viable. So be prepared to fight your corner and prove the business can work.

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Suhail is a tech geek who loves everything about technology. He is a professional tech blogger on multiple tech blogs and share top notch tech product reviews, press releases and news as they break. Follow Suhail at Google+

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