Business partner with bad credit? Do these things

Today you can pick from several business loan options when you have a  business partner with bad credit.   That’s good news.   That partner can even be you!

A business partners with a low credit score will cause challenges .   Our programs are designed exactly for those businesses.    Apply below and get funding today.
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FAQ Frequently asked questions on getting a business loan with a partner with bad credit

How can I get a business loan with my partner that has bad credit?
Search for lenders that offer programs specifically for business owners with bad personal credit and low credit scores. Ask about approval requirements in advance including a minimum credit score.
We were declined for a business loan because of my partner’s bad credit. What can we do?
One option is to lower the ownership percentage of the partner with low credit scores at the secretary of state so they will have below
20% ownership. Also continue to look for programs that approve owners with damaged credit.
How can we fix my business partner’s bad credit?
Review the credit bureau. Dispute any incorrect reporting immediately which should raise the score fast. Open some new accounts and make
timely payments. The bad credit owner can start on a credit repair program.
My partner’s credit score is under 600. How can we get business funding?
If your credit score is better than your partner, then list yourself as the first applicant. If your ownership percentage is over 50%, then
apply with just your information. Info on the bad credit owner can be provided later if the lender asks for it.

Getting a business loan

Options are more limited when applying for a business loan with a business partner that has derogatory personal credit. If the business owner with bad credit has more than a 20% ownership in the business, then most lenders will look at their credit. Some lenders will not look at credit if the ownership percentage is less that 20%. If the ownership percentage is less than 5% or 10%, more lenders will not look at the credit of those owners. If the business partner with bad credit has close to 50% ownership interest, then chances are much higher the request will be declined. This is especially true with more traditional lenders like banks and the SBA.

Getting a business location

Renting a location

Once a business finds a commercial location, the business owner’s credit is looked at. If the business is renting a location, the landlord will have the credit of the owners reviewed.
With damaged credit, the business may be denied for a business rental request. Discuss this with the landlord. If the other owner has very good credit, the landlord may make an exception based on the stronger credit.

Buying a location

If the business wants to finance the purchase of a location through a commercial mortgage, the lenders will also look at all the owner’s credit. The level of scrutiny will be higher than with a rental request, including full financial information.

Establishing business trade accounts

Almost all businesses establish trade accounts.   Companies check the business and personal credit of the main owners when a trade account is applied for.   Damaged credit may be a reason for denial.   Not being able to secure important trade accounts can be very damaging to a business. This can cause the business to be short of the inventory, equipment and other services it needs to be successful.

Even if the business can secure the trade accounts it needs, the terms may be more expensive because of the business partner with bad credit. This will translate to increased costs to operate.

Obtaining Government and Private contracts

When a business bids on private or government contracts, the personal credit of the owners is reviewed. If there is a business owner with bad credit, it will be more difficult to secure these contracts. The contract request may even be denied for this reason.

Background checks

There are many reasons why a background check for a business loan may be completed on the owners.  Some of the reasons have already been listed. If a background check is requested, it will include a personal credit check.  Bad credit of any of the owners may be a reason for denial in a background check.


A number of negative consequences of having a business owner with bad credit have been reviewed.  All is not lost for business owners with bad credit!  The problem can be mitigated or improved upon.

Change in ownership percentage

The biggest change that can be made is lowering the percentage of ownership of the business partner with bad credit.  Those owners may not agree to this.    Lowering ownership to less than 20% should prevent declines for credit.    An amount less than 10% would be better. Further, an ownership percentage of less than 5% would eliminate the problem in most cases.

The solution of lowering their ownership percentage will often not be popular with many of these owners. A remedy to this is to consider other changes in the bylaws of the corporation. There are many options including stock ownership in the company.   A higher salary and a commission structure can be added or increased. Another option is to pay more towards their IRA. All of these actions are options to balance a reduced ownership percentage.

Change articles of incorporation

If the business partner with bad credit agrees to lowering their ownership percentage, the Articles of Incorporation should be changed to reflect this.  Many States show ownership percentage in the Articles of Incorporation.  After the Articles of Incorporation are updated to reflect the new ownership percentages, they should be submitted to the Secretary of State.

Updating the Secretary of State

Update the Secretary of State listing. The Secretary of State lists information on the company and it’s owners.  Remove the business owner with bad credit or lower their ownership percentage.  List the owner with better credit as the main owner.

Update business credit reports

Review and update business credit reports. This includes Dun & Bradstreet and Experian Business credit report. There is a section listing the owner’s name. This should be the owner with the stronger credit.

Callers also call in requesting help with a “business owner with bad credit”.   Other times callers ask for help for a “business owner with damaged credit”.

If assistance is needed to prepare business plans or financial statements, the SBA Small Business Administration has excellent resources.