Overcoming Financial Challenges of Starting a Business with Bad Credit

When you have bad credit, it’s quite common to feel like you are stuck in life. It’s harder to get loans and secure new credit cards, and even finding a new apartment to rent can feel impossible.

The idea of starting a new business might seem like a pipedream with your current credit score, but it isn’t. Bad credit, or high personal debt, creates extra challenges that can make starting a business difficult, but not impossible. Common problems that people in this situation usually have are:

  • unable to secure a loan for startup money
  • having a hard time getting good credit cards to handle payment gaps
  • struggling with personal debt while the business needs extra money

These problems, while difficult, can be overcome. It just requires some extra hard work, creative planning, and finding alternative solutions for each problem.

Finding Alternative Sources of Startup Money

Securing financing for your small business is one of the biggest challenges of entrepreneurship. It’s exponentially more difficult if you have a bad credit score (somewhere between 300 and 620).Most lenders and banks weigh credit scores heavily in their loan considerations, so a bad score usually means no loan.

Luckily, there are other ways to get startup money for your new business. Before you start investigating them, you need to be sure you have a strong business plan and presentation. Have hard data showing what type of market you are pursuing, what benefits your business will have over others, and potentially a prototype if selling a physical product.

A good place to start is finding an investor for your business. An investor is less likely to check or even care if you have bad credit; they will be more concerned with your business skills and how viable your business is. Finding investors isn’t easy, but there are resources to help. Use your professional network to find them, contact local chambers of commerce, and use online investor sites to make connections.

Another solution is going into business with a partner. They might be able to provide the capital you need, or have a better credit score and be able to secure the business loan. The downside of a business partner though is having to split profits.

While much more difficult to pull off, many startups have turned to crowdfunding for their startup money. That way, instead of asking for thousands of dollars from a single source, they can ask for a few bucks from a lot of people. Many crowdfunding campaigns fail, though, and is often a last ditch effort to get the necessary funding.

Paying Bills on Your Schedule

When first starting your business, money is going to be very tight. When having to pay your bills and expenses, you might not have the money available at the right time. That’s why company credit cards are so important. They can help businesses manage their money and pay bills when it works for them.

The problem is that with a poor credit score comes difficulty obtaining a credit card. Either credit card companies will deny your application, or they will have limiting conditions on the card. These conditions could include high-interest rates, extra fees, or low credit limits.

If you can secure a credit card of some kind or another, do it. Even a poor credit card can give a business the flexibility it needs. Just be sure to pay it off when the bill comes due or you’ll find yourself deeper in debt. Work on improving your credit score and when you reach a better score ratio, get new credit cards. Then you can utilize the rewards from those credit cards to help out your business.

Getting a Personal Loan with Bad Credit

If you have bad credit, it’s very unlikely you’ll be able to secure a small business loan. It is possible, though, to get a personal loan with bad credit, just be sure you know what you are doing.

Some lenders specialize in giving out loans to people with bad credit, but they often come with massive conditions. A common condition is really high-interest rates, making the lender a lot of extra money and paying off the loan a very long and difficult process. Other limitations typically include putting up personal items as collateral, taking the money directly out of a paycheck, or an extra fee for paying off the loan early.


When looking to start a business, be sure to weigh and pursue all the options you can. Startup money can be hard to come by, but without it, your business can’t succeed. Picking the wrong route can cripple a business with debt or a lack of funds. If your credit score or personal debt makes it impossible or too difficult to start a business, consider waiting till things improve. A few years of paying bills and credit cards on time is often all it takes to get a bad score to an average or even good credit score. Be sure any choices you make are as smart and safe as possible.