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How to Start a Business with Bad Credit in 2022|Expert Lessons

Finding money to start a business with when your personal credit is bad is not easy, but it can be done.

There are some alternative ways you could potentially get the money you need to get your business off the ground. In this piece, you can have a full understanding of how to start a business with bad credit.

Times are tough especially for aspiring entrepreneurs looking to get their business started. While the economy should never be a deterrent to starting a small business (regardless of whether the economy is up or down – people and businesses still need to consume goods and services).

Down economies have some impact on business owners’ ability to find and maintain capital for their ventures.

So, in this writing, we shall journey to explore the possible ways to start a business with bad credit.

Can I start a business with no money?

Figuring out how to get money to start a business is not easy. While there are some people who start a business with no money, most business owners usually have some type of capital to invest in their business – be it from personal savings, retirement accounts, or loans from friends and family.

However, they usually do not have all of the resources to start their business and struggle to distribute the money they have among the numerous start-up costs they will incur.

Additionally, bad credit (or even no credit) makes it very difficult for business owners to get unsecured working capital for things like marketing, payroll, or even office supplies.

Regardless of what liquid capital (cash on hand) a business owner has, entering a new business should be used for the overall development and growth of the business – it’s essentially like putting your own venture capital into practice.

However, this allocation method usually leaves little or no extra cash for other items that businesses need to run their business, including tools and machinery for providing their goods or services, inventory, rental, or even office equipment including computers, or even copiers Vehicles – items that are used in the daily life of all businesses.

Why is it difficult to get business loans with bad credit?

When banks evaluate loan applications, they consider the “five Cs” of the loan: character, capacity, capital, collateral, and terms.

As young companies, startups can struggle to demonstrate their creditworthiness in these areas. With little to no company history and few assets available, there is no reliable record of cash flow.

Because of this, it is difficult to prove that you are growing and this leaves your credit rating to speak concerning your ability to repay the loan.

Without an excellent FICO score, approvals are difficult to come by. Working in an industry with higher risks than others can also contribute to the problem.

You could join the small group of business owners who start their businesses with personal resources. However, doing this can put you in a dangerous financial position – especially if your credit score is already low.

Obtaining funding from sources other than banks will give you the capital you need to support your dreams without putting your personal wealth at risk.

Can I get a business loan with bad credit?

It is possible to get a business loan with bad credit if your business is otherwise in good shape. Lenders have different qualifications and will likely consider the following in addition to your creditworthiness:

  • How long have you been in business?
  • What is your annual turnover?
  • How strong your cash flow is?
  • What kind of collateral can you provide?

The reasons for your low credit score can also influence a lender’s decision. For example, getting approval will likely be more difficult if a recent bankruptcy or loan default is taking your score down.

How to get a business loan even with bad credit

  • Check your balance. Before applying for a small business loan, do a credit check to see what the lenders will see. You can get a free credit score on NerdWallet and get your personal credit report for free at the three major reporting bureaus at

  • Take some time and build your credit. If your credit score is lower than you want it to be, consider ways to build it before applying for business finance. For example, look for errors in your credit reports and contact the appropriate credit bureau.

    Other strategies for building credit may include making payments and paying off or paying off debts, which can also build your business credit.

A low credit score can lead to a high-interest rate, making it harder to repay your new loan and making you financially worse off than you were when you started. Working to get the best deal possible will help you position yourself for success.

How Do I Get Loan to Start A Business with Bad Credit?

Banks and credit unions are unlikely to approve you if you have bad credit. However, even with bad credit, you can get a loan to start a business with these alternative sources:

#1. Online Lenders

Most online lenders require a minimum personal loan value between 500 and 650. However, some do not have a minimum loan value which instead focuses on factors like your company’s cash flow.

Online lenders offer easier approvals and faster funding than other business loan options, but they usually charge higher interest rates – even for those with good credit.

#2. CDFIs

A financial institution for community development (CDFI) receives government funding to give banks access to low-income or underserved communities.

CDFIs are often banks and credit unions, but they do not have the same stringent lending requirements for lending as these financial institutions.

If you are eligible for CDFI funding, you may get a competitive rate. However, funding can be slower than online lenders.

#3. Micro-Lenders

If you have bad credit, you may be able to get micro-credit for your business. Microcredit usually comes from non-profit organizations. Since profit is not the main driver of these organizations, they may be more willing to work with business owners who have poor credit ratings.

The downside of a microcredit loan is in its name: the funds typically run to around $50,000, which may not be enough for the needs of your business.

#4. Your Business

Invoice factoring or financing can convert unpaid customer invoices into instant cash and is best for B2B businesses. While lenders may still check your creditworthiness, approvals are mostly based on the value of your bills.

A merchant cash advance can also lead bad borrowers to use their own business for funding. However, this type of loan should be your last resort as the interest rates can run into the triple digits.

#5. Factoring

Factoring or invoice financing is another option for companies with a weaker credit profile. Factors care more about your customers’ creditworthiness than your profile. Therefore, they often work with companies that have less than excellent credit ratings.

There are many factoring companies online that make it easier and more accessible to factor in invoices than in the past.

With factoring, you sell your receivables to a third party (a factor) at a discount. He pays you a percentage (usually around 85%) of the amount agreed today and pays the balance minus the percentage once it has been picked up by your customer.

#6. Crowdfunding

If you cannot qualify for traditional or alternative or first-time business loans or are unwilling to pay the higher financing costs associated with such loans, crowdfunding may be a non-traditional way for you to access the business capital you need.

There are two main types of crowdfunding options for businesses:

Equity crowdfunding
When crowdfunding stocks, you need to hand over a percentage of your business to investors in exchange for capital.

Reward crowdfunding
To reward crowdfunding, you need to reach out directly to your customer base (or potential customer base) and convince them to make small investments in your business.

In return, you usually give these customers a reward, e.g., the opportunity to be one of the first to receive your company’s new product or service after launch.

#7. Leverage on Grants

Given our government’s propensity to help people get back to work (most new jobs are created by small businesses), there has been an influx of new government and private grants to help people in need – including business owners.

#8. Find credit from your relatives and friends

Everyone likes the idea of ​​entrepreneurship, which is why at some point more than 50 percent of all entrepreneurs get funding from friends and relatives. Your relatives and friends may want you to be successful and may be able to help make your business dream a reality.

Also, they may not stick with your bad credit because they trust you or because they believe your business model is solid.

What are the Best Start-up Loans for Bad Credit?

The best start-up loans for bad credit help businesses get funding when bank loans are not an option. Most of these lenders do credit checks but only accept scores as low as 500-600. Some good types of financing for a startup business with bad credit are personal loans, lines of credit, and bill financing.

Lendio: Best for most small businesses

Lendio is an easy-to-use online loan matchmaking service that allows you to compare and apply for multiple business loans in just 15 minutes and get funded within 24 hours. Even if you have a credit score of only 550, you can likely find some financing options through Lendio.

Lendio is especially helpful if you are new to corporate finance and unsure what options you might qualify for or work for your company.

Credibly: Best for start-ups with bad credit and strong business

Credibly, various types of short-term loans arise including working capital loans and dealer cash advances up to $400,000, business lines of credit up to $250,000, and others. This company is easy to start – although you have to be in business for six months – and will accept you even if you have very poor credit ratings.

Credibly’s working capital loans and MCAs have a minimum credit rating of just 500, while applicants with more than 560 personal loans are offered business lines of credit.

BlueVine: Best for B2B Start-ups with unpaid bills

BlueVine is one of our favorite online small business lending lenders. This is partly because BlueVine has relaxed the requirements of borrowers for invoice factoring services, and partly because BlueVine’s terms are fair and transparent.

BlueVine is also very easy to apply for. You can get approved and submit invoices within 24 hours. Unlike some invoice factoring lenders, BlueVine doesn’t require you to use any invoicing software. Simply upload your unpaid invoices to BlueVine’s practical online dashboard.

In terms of borrower requirements, you only need a score of 530 for BlueVine’s invoice factoring service – perfect for B2B and B2G (Business to Government) start-ups with unpaid invoices.

Accion: Best for minority and women-owned businesses

Accion is a not-for-profit CDFI offering short and medium-term installment loans to startups and existing companies owned by minorities and women.

These loan products mainly include micro-loans that are under $50,000, but there are also some offerings for loans up to $1 million in size.

When you have bad personal credit but need a small start-up loan, Accion is one of the few reputable online lenders that can help you without kidding you.

The only limitation is that loans are offered on a regional basis. You can only apply for the loans that are available in your area.

To qualify for an Accion loan, you will need a credit score of 575 or 550 in some areas and sufficient cash flow to repay the loan.

Startups are also required to have less than $3,000 in outstanding debt, a business plan with a 12-month cash flow forecast, and a partner recommendation

Avant: Best for new business owners with stable personal incomes

Personal loans are a way for brand new businesses to get seed money even if they don’t have significant business records.

This is because these loans are based on your personal creditworthiness and not the strength of your business.

Avant is a reputable provider of personal installment loans ranging from $2,000 to $35,000 that can be used for business purposes including start-up costs. It also accepts credit scores that most personal lenders would refuse (as low as 580).

Fundbox: Best for businesses that use accounting or invoicing software

Fundbox offers two products that are very easy to qualify: revolving credit lines and invoice financing.

As long as you have a credit score of at least 500 and are using compatible billing/accounting software or have a compatible commercial bank account, you should be eligible for Fundbox’s services. Fundbox is for both startups and borrowers


A bad credit score makes qualifying for a corporate loan difficult, but it doesn’t have to stop you altogether.

From loans to credit lines to invoice factoring, you still have a number of financing options. No, you won’t get the lowest interest rates or the biggest loans. However, if you are lucky, you will get the cash your business needs.

Since bad credit business loans often come with higher interest rates and fees, you should be extra sure that you can afford them.


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Franci is a vibrant SEO writer hoping to make a difference with the information I provide my readers.
I'm an Education and financial enthusiast and have written numerous articles in these niches.
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