How To Start a Company When Your Credit Stinks

It feels as if your credit score has an outsized impact on your life. Rent an apartment, your would-be landlord will check your credit. Buy insurance, they will check your credit history. Applying for a job, get ready for a credit check.

While the constant barrage of credit checks is nothing more than an inconvenience for some people, for those with bad credit the experience can bring a sense of dread. Granted, you can use a co-signer for leasing apartments or getting a loan for a house or a car, there are situations where you are effectively locked out without “good” credit.

Businessman with bad credit

In fact, this is increasingly the case for new college graduates, many of whom are saddled with a mountain of student loans. Even if they are dutifully paying off these loans, the debt service impacts their creditworthiness. Therein lies the double-edged sword that is credit – use it too much and your credit sinks, don’t use it at all and no one will trust you.

Imagine you are trying to start a business, even when you have perfect credit this can be difficult. But for those with impaired credit, it can make it all the more difficult for an aspiring entrepreneur. If you find yourself in the latter category, then here are some tips on how to start a company when your credit stinks.

Friends and Family

This is where many entrepreneurs start. They have an idea, but maybe not a proof of concept. Or, their cash flow hasn’t yet matured to the point where they can get more traditional financing.

As such, they reach out to close friends and family members to get a hand up in getting their business started. Think about it, we all have one relative who has done well and while they might say no, they may also be interested in helping you start your business.

However, you don’t want to treat this an informally as asking your parents for $20. Instead, prepare your business case and perfect your pitch. Also, have loan documents ready as this will give your family member a sense that you are treating this not as a gift but rather as the seed funding needed for your business to get started.

Specialty Lenders

You might not know about them, but there are lenders who specialize in bad credit business loans. However, you don’t want to assume that just because they focus on these types of loans that they will give you all the money you need – or any at all.

Start by applying for a small loan which you know you can pay at your current level of operations. Also, check the fine print to see what collateral or other pledges they are looking for. For example, some lenders will make asset-backed loans, while others will provide loans on the strength of an applicant’s accounts receivables.

Also, make sure you run the numbers as you will want to make sure you can make the loan payments without any disruption. In doing so, you can use these loans as an opportunity to build a credit history for your business.

Customer financing

Customer Financing

Did you see how Olive Garden is selling a lifetime pasta pass for $500? You might think this is a gimmick or a scam but stop and think about how this will help the company – even if they only sell 10,000 pasta passes. They are essentially getting a loan from their customers and you could use the same approach to get the money you need to get your company off the ground.

Granted, this approach has most often been used when a service such as software or a car wash is being offered. But there is nothing to say that you couldn’t provide a pre-paid pass as a way to raise funds for your business.

However, there is just one thing you need to be mindful of; once you take money from a customer for the promise of delivering something, you need to deliver. If you don’t then your bad credit could be the least of your worries as you could be looking at potential fraud complaints.


Don’t let your bad credit score keep you from starting a business. Sure, it will make financing more difficult, but it will also force you to think of unique, and legal, ways to get the money you need. What are you waiting for? Use these three tips to get the funds you need to get your business off the ground.