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Starting a Business With Poor Credit History

A great idea comes with great responsibility—or money.

Any good businessman knows that starting a business requires more than just grit and effort. For a business idea to come to life, significant costs are incurred whether you like it or not. From your administrative operations to production costs, starting a business is like bleeding your bank account dry for the first few months or even years of operations.

Most business owners turn to secure loans as an efficient way to acquire working capital because it is not cheap to start a business, and it is not very smart to invest all your available personal cash either. 

However, here comes the dilemma— what if I have a terrible credit history?

You’re not alone. And it is not impossible. 

Starting a business even with poor credit is more than possible. With the right options, ideas, and cash sources, you can get enough funding to kickstart your business ideas.

What is a good credit score?

A business credit score is quite different from a personal credit score. A personal credit score can range from 300 to 850, while a business credit score ranges from 0 to 100. A 0 business credit score means you are a high-risk account, meaning financial institutions would be hesitant to offer you financial help. Those businesses with credit scores above 75 are generally considered in excellent standing.

The acceptability of your credit score differs depending on the type of credit you’re applying for (e.g., car loan, housing loan, etc.). While a business loan has no standard credit score requirement, a good credit score allows for lower interest rates and higher loanable amounts. 

A good business credit score also allows business owners to have secure personal credit, which means you reduce your personal liability from the business and can protect your assets.

What impacts credit score?

Many factors may impact your overall credit score, including:

• Payment history
• Credit utilization
• Credit history
• Recent credit line

In addition, industry size, SIC or  Standard Industrial Classification and company size also matters when computing for business credit scores.

Anthony Martin, Founder and CEO of Choice Mutual , says, 

Many people think that only payment history affects your credit score. While this metric has one of the biggest impacts, the age of your credit accounts, how much of your credit limit you’re using, and how recently you applied for a credit line also play a huge role in determining your credit score.”

How to start a business with poor credit

Chances are you’ll find it hard to secure working capital through traditional credit lines (like banks) with very poor credit scores. 

Don’t fret, though. With some self-awareness, preparation, planning, and sourcing, you can still start a business even with a poor credit history. 

Here’s how:

1. Accurate self-assessment

Needless to say, a poor credit score is a result of bad financial decisions and excessive spending habits. 

At the end of the day, this all boils down to how you perceive money and the role it plays in your day-to-day living. 

Pay attention to how much money you’re spending compared to how much you’re earning. 

2. See where you are in your credit ratings

After being self-aware, the next step is to be financially aware—especially if you are planning to start a business. This includes getting yearly reports of your credit score.

You can get your credit score from each of the three agencies (Equifax, Experian, and TransUnion) for free once a year through AnnualCreditReport.com , which will also include your bill payment history, loans, current debt, bankruptcy history, and lawsuit records.

You can use the FICO score or VantageScore metrics to assess how good or bad your credit score is. Use the following chart to compare both metrics:

Both credit scoring methods also value various factors differently on your overall credit score. As they are both different entities that provide credit reports to lenders, they won’t have the same metrics and would place different weights on your credit performance. This is why it’s important to ensure that you’re using a FICO score, VantageScore, or any other credit score metric before assessing your credit score. 

3. Get a clear view of your finances—and fix them

Your credit score report will include all your existing loans—from mortgage to credit card to student loans—as well as the date they were distributed, any balances and delinquencies in payment, and your payment history. It can also include incurred bankruptcies, lawsuit files, foreclosures, and the companies that have pulled your credit score reports and when they were made. 

With a credit score on hand, you’ll get a clear view of who and how much you owe, and put these data into play into managing your finances effectively and eventually improve your credit score . 

You can start fixing your finances simply by watching what and how you spend, or by:

• Using an application or Excel document to track your income and expenses
• Creating a monthly budget—and sticking to it
• Creating a line between your wants and needs
• Paying off high-interest loans first
• Avoiding late payments or delinquent accounts

4. Develop a solid business plan

You can’t jump into a fire without any protective gear, the same way you can’t start a business without fully preparing the ins and outs of your business operations. 

Before you can secure a working capital for any credit source, it is very important to make sure that you have a solid business plan to assess how profitable or viable your business idea is.

To develop a business plan, you must:

• Have a vision and mission for your business—a clear definite goal and direction
• Determine your business structure
• Perform market analysis
• Determine your niche and our target market
• Outline your initial working capital
• Outline a short-term and long-term budget and financial plan
• Develop a marketing plan
• Get business insurance—including bank loan insurance

5. Apply for business loans

If you have a poor credit score history, chances are most traditional bank loans and lending companies would be hesitant to extend you a loan—and even if they would, would only give a small amount at a ridiculous interest rate.

Here are some business credit sources you can consider as capital sources even with a poor credit history:

Credit cards

Credit cards are easy sources of funds that won’t ask for your credit score before taking out money or any other financial documents. Most credit card personal loans offered by banks come with a fixed interest rate that can be higher or lower than traditional bank loans (especially when some credit card companies offer special promotions for personal credit card advances). 

The challenge with credit cards as a source of funds is that you are limited within your existing credit limit, or any additional limit that may be offered by your credit card company. If you need a higher working capital, a credit card may not be enough and you may need to secure other capital sources.

Andrew Pierce, CEO at LLC Attorney , emphasizes the non-payment of credit card debt, saying: 

Although no person or entity can be detained for non-payment of debt as non-payment constitutes a civil nature and not a criminal one, non-payment of debt, especially credit cards, can only worsen your credit history in the long run.”

Merchant cash advance

A merchant cash advance (MCA) is a type of working capital funding that lends your business cash with repayment made as a percentage of your credit card sales, also called a holdback. Simply put, you need to have card transactions so that the lending company can take a percentage of these credit card sales until you are fully paid, including fees and interest.

The advantage of MCAs is that they don’t require a lengthy approval process, as well as hefty documents—including a credit score report. Most MCA companies will only look at your daily credit card sales to determine if you can pay.

Invoice financing

Invoice financing is also a great way to secure working capital even with a poor credit history because, like MCAs, invoice financing is focused on accounts receivable accounts instead of credit scores.

In invoice financing, you get a credit line from an invoice financing company to extend you a portion (up to 90%) of a certain invoice receivable, collect from your customers, and pay the company your borrowed amount plus dues. 

Invoice financing should not be confused be invoice factoring wherein you “sell” your invoices to a third party, who is now the one responsible for collecting payment from your customers—although both are viable options for business financing that does not require a credit score.

The challenge with invoice financing and factoring is that both come with high borrowing fees, at 1% to 5% of the invoice value per transaction plus other fees.

Business grants

A business grant is money given by a government body, company, or philanthropist to you to finance business operations without any kind of repayment. 

Business grants are essentially free money to help a community or fund a good business idea for the good of society. 

Ryan Zomorodi, Co-Founder and COO of RealEstateSkills.com , says, 

Because business grants are free money, competition is high and they’re hard to find, or they come with very specific requirements or with specific strings attached. These conditions include a time limit on research and development, working closely with your grantor, or creating detailed reports on the use of the grant.” 

You can find business grants from government postings or industry announcements, or they could come from anyone interested in giving a business grant.

Online lending sites

Another option for a working capital source, even with a poor credit history, is through online lending companies. 

Online lending companies extend you a loan with little to no document requirements, and a quick cash turnover—typically the same day you requested the loan. What’s more, most online lending companies promise no impact on your credit scores.

However, even with no impact on your credit score and a surefire way to acquire working capital funding, online lending companies still look at your credit score to know how much money or what interest rate to apply to your loan.

The takeaway 

Starting a business with a poor credit history is more than possible, especially with the vast financing options available like grants, credit card and merchant cash advances, invoice financing, and online lending sites. 

While interest rates can be higher for these unsecured financing options as compared to secured traditional loans, starting a business is and has always been a difficult challenge to conquer, especially for those with poor credit.

Starting a business starts with a well-established business plan and a forward-thinking mindset, even with a poor credit history.

These views are made solely by the author.

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How To Design a Professional Development Plan for Career Growth

Updated: March 11, 2024

Published: September 25, 2023

Climbing the corporate ladder or growing your own business requires constant learning and improvement. 

Sometimes, you’ll learn from mistakes and general experience while working in the field daily. However, having a clear plan to develop your skills is necessary to grow in your profession and reach new heights over the long term.

A professional development plan is a tool that can ensure you gain and enhance your skills in a structured manner.

What is a professional development plan?

A professional development plan is a strategic road map designed to help individuals enhance their skills, knowledge, and expertise in their chosen field. It serves as a guide for setting goals, identifying areas for improvement, and mapping out actionable steps for continuous growth and career development. 

Why do you need a professional development plan?

If you’re on a career path with opportunities to expand into new or higher positions, then odds are you need a plan to develop your skill set. Creating one can increase your odds of earning spots in roles you weren’t eligible for before.

For example, imagine a content editor who aspires to become a digital marketing strategist. In order to earn that promotion and move into that new role, they will need to improve their digital marketing skills. This may involve attending industry conferences and events, enrolling in online courses, earning a new degree, and seeking mentorship from experienced digital marketers, amongst other strategies. 

By following a well-crafted plan, individuals can unlock their full potential and stay ahead in today’s competitive job market.

Benefits of a professional development plan

Here’s a look at some of the other benefits of having a professional development plan: 

It clarifies your goals

A development plan defines specific goals you want to reach, such as earning a promotion, learning new technologies, improving your communication, and enhancing your leadership skills . For example, a software engineer in product design may set a goal to become proficient in a new programming language to expand their job opportunities.

It identifies strengths and weaknesses

Professional development plans don’t just guide your next steps — they review your current performance to identify strengths and weaknesses. By assessing your current skills and knowledge, you can identify areas where you excel and areas that need improvement. For instance, a sales professional may realize they excel at building relationships but lack negotiation skills.

It keeps you motivated and focused

Having a development plan keeps you motivated and focused on your career growth. It provides a sense of direction and purpose, helping you overcome obstacles and stay committed to your goals.

A human resources professional who has a goal of becoming a director within a year, for example, may become disenchanted with her goal if she doesn’t have a clear-cut way of achieving it. Building a professional development plan that outlines the skills she needs to foster and the strategies she can use to do so can keep her motivated over the long term.

It helps you maintain a competitive edge

The business landscape constantly evolves. A development plan ensures you stay up to date with industry trends and advancements. For instance, a health care professional may include continuous education in their plan, as well as a goal of attending conferences to stay informed about the latest medical breakthroughs.

It increases job satisfaction

A development plan allows you to pursue your passions and interests within your profession. By aligning your career goals with your personal aspirations, you can find greater fulfillment and satisfaction in your work. For example, a graphic designer may focus on developing their illustration skills to work on print projects that align with their artistic interests.

Remember, a professional development plan isn’t a one-time task, but an ongoing process that evolves with your career aspirations. As you accomplish pieces of your plan and start to realize your goals, you should constantly return to your plan and think about what else you may want to add.

How to create a professional development plan

It’s time to walk the talk of improving your professional skills. But where should you begin when creating your professional development plan?

Follow these five steps.

Step 1: Assess your current skills and knowledge

Creating a professional development plan starts with assessing your current skills and knowledge. This identifies your strengths and areas for improvement.

Here’s how to assess your current skills and knowledge:

• Conduct a self-assessment: Reflect on your current skills, knowledge, and experience. What things can you do well? What projects or tasks do you struggle with the most? Then determine where you’d like to invest time to grow professionally.
• Seek feedback: Request feedback from your supervisors, colleagues, or mentors. They can provide valuable insights into your performance and areas where you can further develop your skills.
• Evaluate performance reviews: Review your past performance evaluations or appraisals to identify any recurring feedback or areas for improvement.
• Identify skill gaps: Compare your current skills and knowledge with the requirements of your desired career path or future roles. Identify any gaps that need addressing to achieve your professional goals.

By assessing your current skills and knowledge, you gain a clear understanding of where you stand professionally and can identify the areas that require further development.

Step 2: Set SMART goals

After assessing your current skills and knowledge, the next step is to set SMART goals. SMART is an acronym that stands for Specific, Measurable, Achievable, Relevant, and Time-Bound. Setting SMART goals ensures your objectives are clear, actionable, and aligned with your professional growth.

Here’s how you can set SMART goals:

1. Specific: Clearly define what you want to achieve. Be specific about the skills or knowledge you want to develop and the outcomes you expect.

Example: Improve my presentation skills to deliver engaging presentations to clients and stakeholders confidently.

2. Measurable: Set criteria to measure your progress and success. This tracks your development and increases motivation.

Example: Increase my presentation skills rating from 7 to 9 on a scale of 1-10 within six months.

3. Achievable: Ensure your goals are realistic and attainable. Consider your available resources, time, and capabilities.

Example: Attend presentation skills workshops, practice presentations regularly, and seek feedback from colleagues and mentors.

4. Relevant: Align your goals with your career aspirations and the needs of your role or industry. Ensure that they contribute to your professional growth.

Example: Enhance presentation skills to excel in client-facing roles and contribute to business development efforts.

5. Time-Bound: Set a deadline or timeline for achieving your goals. This adds a sense of urgency and helps you stay focused.

Example: Improve presentation skills within six months by attending two workshops, practicing presentations weekly, and receiving feedback from colleagues.

When we put all those pieces together, we get a single goal that says, “Improve presentation skills within six months by attending two workshops, practicing presentations weekly, and receiving feedback from colleagues.” 

Step 3: Identify development opportunities

After assessing your skills and setting SMART goals, the next step is identifying development opportunities. This involves finding opportunities to enhance your knowledge and skills.

Here are several ideas:

• Research available resources: Conduct thorough research to identify the resources and opportunities that can support your professional growth. This may include online platforms, books, industry publications, professional associations, and training programs.
• Attend workshops, conferences, and online courses: Participating in workshops, conferences, and online courses can provide valuable learning experiences and help you acquire new skills and knowledge. Look for relevant events and courses that align with your goals and interests.
• Seek out mentorship: Finding a mentor experienced in your field can provide guidance, support, and valuable insights. Seek out professionals who have achieved success in areas you want to develop and establish a mentorship relationship with them.
• Find networking opportunities: Engaging in networking activities allows you to connect with professionals in your industry and expand your professional network. Attend industry events, join professional groups or associations, and participate in online communities to build connections and learn from others.

The more resources and opportunities you explore, the greater the possibility you’ll have to enhance your skills and grow your career. So add one or more from the list to your professional development plan.

Step 4: Create an action plan

Once you’ve identified development opportunities, create an action plan. Break down your goals into smaller, manageable milestones and create a timeline and schedule for your development activities.

Here’s an example of how you can create an effective action plan:

1. Breaking down goals into smaller milestones: Divide your goals into smaller, achievable milestones. This helps you track your progress and stay motivated as you accomplish each milestone. Break down your goals into specific tasks or activities.

Example: If your goal is to improve your project management skills, your milestones could be completing a project management course, applying the learned skills to a real-life project, and receiving positive feedback from stakeholders.

2. Creating a timeline: Set a timeline for each milestone and the overall completion of your goals. Consider the resources available to you and any external deadlines or constraints. Be realistic in your timeline to ensure you have enough time to complete each milestone effectively.

Example: You might allocate three months for completing the project management course, two months for applying the skills to a real-life project, and one month for receiving feedback and making improvements.

3. Scheduling development activities: Create a schedule for your development activities. Determine when and how often you’ll engage in each activity, such as attending workshops and networking events, or working on specific tasks. This helps you allocate time and resources effectively.

Example: You might attend a project management workshop every other week, spend two hours each week practicing project management techniques, and allocate dedicated time for networking activities on a monthly basis.

Creating an action plan establishes a clear road map for achieving your goals. This helps you stay organized, focused, and accountable, and ensures you take a structured approach to  reaching your goals.

Step 5: Implement and review the plan

With your action plan in place, it’s time to implement it and regularly review your progress.

Here’s how you can effectively implement and review your professional development plan:

• Stay committed to the plan: Prioritize the activities outlined in your action plan. Make a conscious effort to allocate time and resources for your development activities and treat them as a priority.
• Schedule regular check-ins: Set specific dates or intervals to check in on your progress. This allows you to assess how well you’re sticking to your plan and achieving your milestones. Regular check-ins help you stay accountable and make any necessary adjustments to your plan if needed.
• Review your progress: During your check-ins, review your progress toward your goals and milestones. Evaluate what’s working well and which areas need improvement. Reflect on the outcomes of your development activities and assess whether they’re helping you achieve your desired outcomes.
• Make adjustments: Based on your progress reviews, make any necessary adjustments to your plan. This may involve modifying timelines, revising milestones, or exploring additional development opportunities. Stay flexible and adapt your plan as needed to ensure continued growth and success.
• Celebrate achievements: Recognize and celebrate your achievements along the way. Acknowledge the progress you’ve made and the skills you’ve developed. This helps to maintain motivation and positive momentum in your professional development journey.

Measuring success and adjusting your professional development plan are crucial for growth. By tracking progress, identifying areas for improvement, and making necessary adjustments, you can ensure your plan remains effective and aligned with your goals. So stay proactive and adaptable to achieve continuous professional growth.

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National Plan to Look Into Homeowners Insurers Hits a Hurdle

Roughly two weeks after state regulators said they were collecting details on insurers’ homeowners businesses, key states may opt out, undermining the effort.

By Emily Flitter

A sweeping effort by state regulators to find out why homeowners insurance is so expensive and hard for customers to secure is already facing challenges, as some crucial states say they may opt out of the call for data.

The National Association of Insurance Commissioners, an umbrella group representing state insurance regulators, said on March 8 that state agencies were asking insurers for detailed data on how they were treating their customers, including information about the kinds of coverage they offer in various ZIP codes, the recent history of claims payouts in those areas, the size of deductibles for insurance customers and their opportunities for discounts by fixing or upgrading parts of their homes. At the time, a top N.A.I.C. official said the goal was to “address the critical challenge of the affordability and availability of homeowners’ insurance and the financial health of insurance companies.”

The group said data requests would reach more than 400 insurance companies and offer insight into about 80 percent of all homeowners’ plans in the United States as measured by total insurance premiums. Some of the data would be shared with the Treasury Department to help it pinpoint where homeowners face the highest risks and living costs. State and federal officials called the effort a watershed moment for the insurance sector. The request is the biggest and broadest request for information that insurance companies have had to face from a regulator in decades. Such granular data has never been collected on a national level.

But each state regulator can decide whether to participate in the data call, and some of the states where homeowners face the greatest risks of damage from severe storms and where insurance markets are most turbulent — like Louisiana, Texas and Florida, where Republican politicians regularly balk at policies dealing with climate change — may either share limited data or opt out of the program entirely.

Regulators say that even without full participation, the program is still an enormous advancement in their quest to understand what is happening with homeowners insurance. But the states’ reluctance to participate could leave a significant hole in the picture regulators are trying to piece together about homeowners insurance markets across the country. It could stymie their efforts to decide exactly how to deal with the tangle of problems, caused by inflation and increasingly severe weather driven by climate change, that have caused some major insurers to leave states like Florida and California. In those places, and in others hit hard by catastrophic events like windstorms and wildfires, some homeowners unable to pay the rising costs of insurance have slashed their coverage .

“It makes no sense to leave out the 20 percent of the country with the significant climate risk and related consumer impacts or leave out the types of insurance impacting the most vulnerable consumers,” said Birny Birnbaum, an insurance expert who is the executive director of the Center for Economic Justice, a nonprofit focused on equal access to economic opportunity.

During a meeting on Wednesday of the Federal Advisory Committee on Insurance, attended by Treasury officials, insurance industry representatives and state regulators, Mr. Birnbaum told attendees he feared that as many as 10 states would decline to share data.

Steven E. Seitz, director of the Treasury’s Federal Insurance Office, declined to name or discuss the states that were not participating, but said at the meeting that the data call was “a very positive first step on the data coverage.”

But Texas and Florida have already expressed a reluctance to fully participate in the effort, and Louisiana is opting out completely.

John Ford, a spokesman for Louisiana’s insurance regulator, said its commissioner, Timothy J. Temple, had decided not to compel companies operating in the state to share their data. Mr. Temple and his staff are “focused this year on regulatory and legislative efforts that will attract insurers to our state and stabilize the market,” Mr. Ford said.

Ben Gonzalez, a spokesman for the Texas Department of Insurance, said, “Texas is not planning to collect any new information,” because it already collects data from insurers that is “generally responsive” to what the umbrella group was asking for.

Florida is weighing what information to share, according to a spokeswoman. A bill passed this year by the Florida Legislature would require insurers in the state to report ZIP code-level information about claims payouts. But they would not have to disclose the same kinds of details about the policies they had offered customers, like the size of their deductibles, that the National Association of Insurance Commissioners data call asks for.

Some information from states that have entirely opted out of the data call could still make its way to the umbrella group. That’s because regulators in participating states, like Pennsylvania, are asking national brands that operate in their states, like State Farm and Nationwide, to share details about their homeowners plans wherever they are sold.

A spokeswoman for the N.A.I.C. said the group did not plan to publish a list of participating states.

Emily Flitter writes about finance and how it impacts society. More about Emily Flitter