Starting Your Dream Business When Your Credit Is a Nightmare

I meet people all the time who have incredible ideas for businesses. Ideas that would revitalize our communities… make life easier for countless folks… and bring financial wellness to their families.

But – they can’t make those dreams a reality because they don’t have the personal credit rating they need to qualify for business financing.

If this sounds familiar… keep reading. You have more options than you realize!

Starting a business with bad credit is not impossible. In fact, only 25% of start-ups get their money from traditional lending. That means 75% use funding sources that rely much less on your personal credit score.

First and foremost… get your personal credit profile cleaned up. The funding opportunities I explain here do not rely solely on your personal credit profile, but your credit score still does come in to play. Completing professional credit restoration through a reputable company like NCES can help raise your credit score 50 – 150 points in a matter of months. And once your credit is restored – keep it clean! Pay every bill on time. Shy away from building up new debt. And check your credit report quarterly to look for red flags.

For start up cash, look in your own piggy bank first. See how much savings you have and how you can best leverage it to start your business. Can you start small at home and then scale up as you grow? Can your cash act as a deposit on inventory that you pay off as you sell it? Having your own cash tied up in your business will make you even more motivated to be successful. (A word of caution: think carefully before you get a home equity line of credit to start a business. If the business fails, you could lose your home too.)

Short on cash? Hit up your friends and relatives. If you really do have a great idea, the people you know best may be willing to pitch in some cash to help you get started. Be sure to have clear repayment plans for each person that wants to be paid back, including interest rates and length of the loan. You may want to consult a lawyer or use an online site like Printable Contracts to write your own.

If you’d rather not borrow from friends and family, why not ask the rest of the world? Spend some time looking into social lending opportunities like LendingClub, Prosper, Upstart, and Peerform. Even though money borrowed through social lending companies is considered a personal loan, you can use it for any purpose you need, including to start your business. Many of these companies have lending opportunities specifically designed for people with less-than-perfect credit. Just be sure to look at the interest rates carefully! They can be as low an 11% and as high as 38%.

Microloans are another option for starting a business with bad credit. Once just available for startups in developing countries, microloans are now available in the US in amounts up to $50,000 (Not so micro!) through specialty lenders and backed by the Small Business Administration (SBA). For an idea of where to start looking into a microloan for your start up, go to the SBA microloan page. To see a list of all SBA participating microlenders organized by state, read this PDF. For online microlending not through the SBA see

If your business idea has wide social appeal, you can also try crowdfunding. Unlike social lending, crowdfunding provides money that does not have to be paid back. Heck… if some guy can raise $10,000 to make potato salad, you stand a pretty good chance getting what you need to start your business. Check out Kickstarter, Crowdfunder, and Indiegogo for ideas.

And speaking of grants, if you are a woman, of a minority race, live in a rural area, or are disabled, you have even more opportunities for “free” money. Business grants are available from the federal government, state governments, and private organizations. See this article from the Houston Chronicle for a place to start looking for business grants.

So, go ahead and keep dreaming! There ARE options out there for starting a business with bad credit. And, we’re here to help you get your personal credit back on track to make the journey even easier!


If you have any questions, please give us a call at 770-952-5168 or contact us online.

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This information is intended for informational and educational purposes only and not as legal advice. If you have concerns about your credit report, harassment, identity theft, illegal collections activity, garnishments, or property liens, you should consult an attorney who specializes in consumer rights and defense.

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