KEY TAKEAWAYS:
P Starting a small business begins with having an idea and mapping out a plan to bring it to life.
P Many government resources can help – from “how-to” guides for writing a business plan to applying for small business grants.
P If you need small business financing and have low credit, there are strategies to improve your credit score.
If you’ve decided to start a small business and join the ranks of Canada’s 3.5 million[i] entrepreneurs, it can be an exciting time full of options, opportunities, and possibilities. As you explore the steps you need to take, you may be concerned that your credit history will hold you back from getting financing. Here, we’ll show you how to get started and work on rebuilding your low credit.
Success starts with a solid plan
What you’ll need to open a business and start making money may not be obvious when starting out. You may overestimate how quickly you’ll start turning a profit or underestimate how much time and money it takes to make a living as a business owner.
Using a business plan template, like the one on the Government of Canada website, is a great way to get started because you’ll be asked to think about things that might not be obvious to a first-time entrepreneur, such as:
- Can you start your business without borrowing money?
- Do you need one-time, start-up financing or ongoing access to credit to pay for inventory and rent?
- How will paying back a business loan affect your ability to hire helpers or buy supplies
Don’t let these questions intimidate or discourage you. The point of putting your plan in writing is to spot the obstacles to your success and identify the best way to solve them.
Starting a business with low credit
If your business plan relies on access to credit, in the form of a small business loan, or ongoing line of credit, you need to look at your credit report and know your current credit score. If you don’t have good credit, don’t get discouraged. It’s just one of the obstacles you’ll need to overcome.
Banks and other lenders may not be an option if your credit score is low. But depending on how soon you plan to start your business, you may have time to do something about that. Here are three things to consider if you need a small business loan to get your idea off the ground:
Rebuild your low credit
Your credit score will range from 300 to 900 and goes up and down based on how well you manage debt. It’s what lenders use to determine if you are eligible to borrow. The average score is around 650. The higher, the better. For tips and advice on how to rebuild credit, visit the goeasy Academy.
Apply for government grants
Research small business government grants. If you have a solid business case, you may be eligible for grants that don’t need to be paid back. This is a great way to get a leg up on what you need to get your business running. Start researching all the free services available.
Explore alternative financing
Consider alternative forms of financing such as personal loans from friends or family. You can also explore low credit loans through alternative lenders in Canada. If you go down this path, lock down your interest rate and use it to calculate your expenses in your business plan.
Exploring your options, while you take steps to improve your credit score, will help you refine your business plan and get an accurate estimate of how much it will cost to launch this new and exciting stage of your life.
How we can help
If you’re in the early stages of business planning, you may be able to improve your credit score by taking out a short-term personal loan, making all the payments on time, and paying off the loan early or on schedule. This simple strategy can help you improve your credit score and that could help you qualify for a lower interest rate when it comes time to borrow money. Learn more about how borrowing to improve your credit actually works.
If you’ve already started your business and you have a track record of at least six months, you may be eligible for between $5,000 and $500,000 in small business financing through our partner, Merchant Growth. You can apply today and get an instant, no-obligation quote so you'll know exactly what you qualify for. Once approved, you will receive the funds in your account within 24 hours.
Disclaimer: This content is intended for informational purposes only and does not constitute financial advice on any subject matter.
[i] Made in CA website. Entrepreneur Statistics in Canada. Updated: March 12, 2024. Viewed March 2024. Source.