Starting a Business with a Low Personal Credit Score

Recently a caller to my consulting firm asked, “Will my poor credit score hurt my ability to start a business?”  “Not if you have tons of money,” I replied. The long pause suggested that wasn’t the answer the caller was looking for. Turns out, he did not have tons of money. Okay, then, what can you do if you have a great business idea, but no money and poor credit? Let’s be clear right up front, this is a challenge. As a would-be entrepreneur, you’ll be continuously faced with challenges and your ability to overcome the odds will be tested many times. So, you might as well start with this one. To state the obvious, it is very difficult to get a business loan with a poor personal credit score.  Banks will look for all the evidence they can find to suggest they will get their money back. A poor credit score is going to be a problem as far as getting a loan is concerned. If this is your predicament, take heart in the fact that even a good credit score is not enough to qualify someone for a business loan these days. The good news is that there are many types of businesses that can be started with little or no capital.   Service businesses in particular are perfect for low-cost startups.  But they are not the only type of business where this can be done. For any type of business, the key to get started is to identify a problem, find someone with the problem, and get them to agree to give you money for solving the problem. If you can sell now, before you build your empire, you can start a business with poor credit. So how are you going to deliver? Think about that customer and what it’s going to take to solve their problem. What is it you absolutely must have to deliver that solution? Your next job is to use your selling skills to find people who already have what you need and would be happy to accept a portion of your customer’s money in exchange for their participation.

• Need an office or retail space? Find a complementary business with too much space and offer to pay a commission to them on all your sales. They are out there.
• Need specialty equipment? Who has that type of equipment now? Could you arrange to use their equipment on weekends or in the evenings in exchange for a percentage of your billings? People who have equipment with idle time might jump at the chance to turn that downtime into a little extra cash.
• Need supplies to deliver on the sale? Ask for a deposit from the customer large enough to cover your upfront costs.
• Need to hire a person with a specific skill-set? Look for individuals who will work on a moonlighting basis accepting payment after your customer pays you. Or, find a partner who will work for “sweat equity” getting paid only as sales permit and owning a small piece of the company.

These are just a few examples meant to help you think of opportunities in your particular type of business. Get creative and don’t be timid about asking. The bottom line is this: If you have good selling skills and the ability to forge creative, win-win relationships, you can overcome issues with your personal credit score. Your low credit score could be a blessing in disguise because you will be forced to solve real problems for real customers from the very beginning. What’s more, you’ll be forced to create an efficient organization where every dollar must be stretched as far as possible. These traits and habits will help you form a business that can be very profitable once it’s ramped up. The bonus is that ultimately this will lead to you fixing that credit score problem too!