Posted 4 months ago

How to Fund a Business If It Has a Bad Credit History

A credit score is a result of an equation that’s there to determine how fiscally responsible you are. This is an incredibly important feature for a lender, due to the fact that it tells them of the probability that they’ll get their money back. After all, if you’ve failed to return several of your last debts in time, what’s their guarantee that this time around will be any different? Unfortunately, bad credit history can be a result of a bad set of circumstances; nonetheless, this isn’t something that these lenders may even want to hear about.

Fortunately, a capable entrepreneur has more than a few ways to provide funds for their business, even without them. That will, for sure, prevent you from making some of the biggest mistakes most entrepreneurs are making. That being said, here are several ways to fund a business even if it has a bad credit history.

Bad credit loans

Fortunately for you, not every lender requires a flawless credit history. In fact, there are so many small businesses and startups out there with a ruinous credit score, that some lenders found it lucrative to specialize in loans for companies with a poor credit score. That being said, this type of business loan has easier lending criteria than regular credits. Even more important is the fact that these online lenders provide you with an opportunity to apply and get approved or rejected in as much as 5 minutes. This means that even if your plan fails, you waste no time and can start looking elsewhere.

Secured and unsecured loans

First of all, a business loan is something that can be secured even with a bad credit rating. Why? Well, because you usually have someone or something to act as a guarantee. For instance, you can use collateral, such as a piece of a real estate, vehicle or equity in a company. In this way, even with a bad credit score, the bank or credit union won’t have trouble approving your loan, due to the fact that they’ll know that there’s always a way for them to get their money back. The problem, however, lies in the fact that should the worst come to pass, you’ll lose a valuable personal asset. So, if potentially losing your assets sound too risky for you, you should opt for no security business loans. Unlike traditional secured loans, unsecured loans don’t require any capital to be placed against the amount borrowed, which makes securing funds for your business easy and risk-free.

Loan from a friend or a family member

Another thing you could do is try to go past the regular structures and ask for a friend or a family member for a loan. Advantages and disadvantages of this are pretty straightforward. First of all, a family member that you’re asking for a loan may not have that much money on their disposal. Second, they may not trust you well enough.

You see, the fact that they know you personally is both good and bad. On the one hand, they won’t require any paperwork, seeing as how they have a personal history as a determining factor. On the other hand, this goes both ways and might even help them make up their mind not to trust you based on one minor loan you failed to return in the past or even an insult that you’ve already forgotten. Moreover, if they do decide to trust you with their money and you fail to return, you’re putting a personal relationship at stake.

Sell an asset

Finally, you can always sell an asset (provided that you have one) in order to provide funds for your business. The advantage of this method lies in the fact that there’s no break-even point and no interest rate. The downsides are the fact that you’ll lose a valuable asset, as well as the fact that you might not get the money you need. The very fact that you need funding when you also have a bad credit rating suggests that you’re not in the best spot. This means that you might be desperate to sell, which is something that a buyer can often sense.


At the end of the day, just because there are ways to fund a business with a bad credit history, this doesn’t mean that improving it isn’t worth it. Sure, it takes time and effort, but your credit history affects so many different aspects of your business. First of all, it determines how credible you are in the eyes of your partners, debtors, investors and suppliers. Second, it affects your ability to get a great deal on your insurance policy, and much, much more. Therefore, some of the funds provided by the above-listed methods should probably be used towards improving your credit score.