How to Fund Your Business When You Have a Low Credit Score

ALTERNATIVE FUNDING SOURCES THAT DON'T RELY ON YOUR CREDIT SCORE

Some lenders are more interested in your market opportunity, traction, and vision rather than your credit score.

Here are a few proven options:

1. Crowdfunding Platforms

Websites like Kickstarter, Indiegogo, and GoFundMe allow you to raise money directly from your future customers and supporters. Success depends on your ability to tell a compelling story, show off your product or service, and offer incentives or rewards. Credit checks? Not part of the process.

Crowdfunding doesn’t just raise money—it validates your idea. If people are willing to fund your campaign before your business even launches, you’ve got built-in demand and a loyal customer base from day one.

2. Microloans and Community-Based Financing

Organizations like Kiva, Accion Opportunity Fund, and local CDFIs (Community Development Financial Institutions) specialize in funding entrepreneurs who don’t meet traditional lending criteria. These groups often evaluate your business plan, community impact, and determination, not just your credit report.

Even a $5,000–$15,000 microloan can go a long way when deployed strategically, helping you purchase inventory, hire help, or invest in marketing.

3. Grants and Competitions

There’s free money on the table—you just have to know where to look. Small business grants are available from government programs, nonprofits, and private foundations, often targeted toward women, people of color, veterans, or rural business owners.

You can also enter business plan competitions hosted by universities, corporations, or chambers of commerce. Winning not only gives you startup capital, but also public recognition, feedback, and credibility.

4. Peer-to-Peer Lending Platforms

Sites like LendingClub or Prosper connect borrowers directly with investors. While some still perform credit checks, others prioritize your income, business potential, or repayment ability. These platforms may offer more flexible terms than a traditional bank.

5. Revenue-Based Financing

In this model, investors provide funds in exchange for a percentage of your monthly revenue until the investment is paid off. This arrangement is great for businesses with predictable income but limited credit. You retain equity, avoid fixed payments, and align your cash flow with your obligations.

While these alternative funding sources offer excellent opportunities, sometimes the fastest path to capital lies much closer to home. This brings us to a funding option that many entrepreneurs overlook or avoid due to discomfort, but one that has launched countless successful businesses.

BORROW FROM FRIENDS AND FAMILY

Ask friends and family. It’s one of the fastest ways to raise capital, but also one of the most emotionally charged. Still, when done right, friends and family funding can be an incredible springboard.

Here’s how to do it professionally:

Lead with your plan. Treat your loved ones like investors. Show them your business plan, revenue model, timeline, and how you’ll use the money.

Schedule the conversation. Don’t bring it up casually over dinner. Ask for a dedicated time to share a well-prepared pitch.

Be transparent about risk. Let them know there’s no guarantee of repayment. This shows maturity and protects relationships.

Offer multiple ways to support. Not everyone has cash to lend—but they may offer referrals, tools, or expertise. Don’t overlook non-monetary contributions.

Put it in writing. Draft a simple loan agreement or promissory note with repayment terms. This protects everyone and shows professionalism.

Done respectfully, family funding can be a solid option that bridges the gap between idea and launch. But if they say no, it could create discomfort in your relationship. 

What do I do if they say no? When friends and family say no, it can feel personal—but it’s important to remember that their decision is often more about their own financial comfort or risk tolerance than a reflection on you or your business idea. A respectful “no” doesn’t mean they don’t believe in you—it just means they may not be in a position to help financially. Thank them sincerely for listening, and don’t let disappointment sour the relationship. Allow yourself a moment to feel the letdown, then refocus your energy on the many other funding options available. Every “no” is simply one step closer to a “yes” from someone else who sees your vision and is ready to invest.

One important note: before you approach family or friends for a loan, think through all the possible reasons they would say no, and address them within yourself first. That way, when they do say no, as they might at first, you’ll be prepared for the no, meaning you can bring your understanding of why they are saying no, and then face it head-on, and turn that no into a yes. If you need support with this, let’s get a call on the calendar so I can help.

CONSIDER STRATEGIC PARTNERSHIPS AND PRIVATE INVESTORS

If you’re thinking bigger—and faster—external investors and business partnerships might be the best path. These options aren’t dependent on your personal credit, but they do require clear communication, strategic thinking, and strong execution.

Here are some options:

1. Angel Investors and Early-Stage VCs

Many angel investors and seed-stage venture capitalists care less about your credit and more about your idea, team, and market potential. If your business offers scalable returns, they may fund you based on growth projections and product-market fit.

To get their attention, focus on a standout pitch deck, traction (even if small), and a clear roadmap for growth. Sites like AngelList or local investor networks can help you make connections.

But, make sure you are capital ready before going this route. Give me a call and let’s discuss what that means, and how I can help you get there.

2. Strategic Business Partnerships

Could another company benefit from your product or service? Consider partnering with a complementary business that’s willing to invest in exchange for exclusive rights, co-branding, or early access. These partnerships can deliver funding, but also customer access, shared infrastructure, or distribution—all without touching your credit score. 

Contracts are critical here as well, so let me know if you are considering strategic business partnerships, and I’ll share how I can help.

3. Industry-Specific Investors

If you’re launching a niche product or local service, look to insiders. A retired chef might fund your food truck. A tech exec might back your app. These investors know the space and are often willing to support promising newcomers who understand the market. 

4. Equity Partnerships With Value-Aligned Investors

Sometimes the best investors bring more than cash—they bring wisdom. Consider offering a small percentage of equity to someone who offers marketing experience, operations guidance, or industry insight. With the right partner, you’re not just funded—you’re fortified.

In both of these last two situations, you are looking at partnership, and you’ll want to get the support of a deal lawyer, who can help you negotiate and document terms. Let’s talk if this is the direction you are going.

EVALUATE OPTIONS FOR FAST-ACCESS CAPITAL (WITH CAUTION)

Merchant cash advances and invoice factoring can get you capital quickly—especially if you have sales or receivables coming in—but be cautious. These options often come with higher fees and shorter repayment windows. Use them only if you have a clear plan to convert that cash into profit quickly.

The journey from idea to funded startup doesn't have to be derailed by credit challenges. With numerous creative funding options available, the key is selecting the right combination of strategies that align with your business model, growth timeline, and comfort level with different types of investors or partners. You also need a clear plan for projecting your cash flow, solid foundational business systems in place, and a trusted advisor to support you.

READY TO MOVE FROM STUCK TO SCALING?

As your Personal Family Lawyer®, I specialize in helping entrepreneurs like you create strategies for growth by ensuring your foundational business systems are in place and are robust enough to attract investors. When you work with me, we start with a  LIFT™ Business Planning Session, where I’ll evaluate your current legal, insurance, financial, and tax systems and identify areas that need improvement. From there, we’ll create a plan to improve your systems so you can carefully and intentionally identify the best funding sources for your business. 

Ready to turn your business dream into a reality? Book a call a 15-minute call with me here to get started.

This article is a service of Sky Unlimited Legal Advisory PC, Personal Family Lawyer® .  We're not your traditional law firm, we stand apart from the rest by helping you make informed and empowered decisions on how to deal with your business throughout life and in the event of an emergency. We offer a complete spectrum of legal services, including a New Business Planning Session or an Existing Business Review Session, which includes a review of all the legal, insurance, financial, and tax systems you need for your business. You can begin by calling our office at (650) 761-0992 today or book online to schedule a Business Planning Session and mention this article to find out how to get this $950 session at no charge.