What is the Impact of Poor Credit on Your Small Business

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Poor credit can impact your small business in several ways. If you have low or no credit, it might be impossible for you to lease space for your business, buy new equipment, or even rent a car to commute to meetings with prospective clients. Shopify estimates that 18% of all business loans are rejected due to poor credit scores, and 30% are because the business is too new. If this issue affects your company, Read on to learn how bad credit can impact your small business.

Increased Insurance Premiums

If you have bad credit, you may qualify for higher insurance rates than people with good credit. A low credit score may indicate that you are less responsible with your payments, which adds risk for an insurance company. Therefore, you may be charged much more for certain types of insurance, such as workers’ compensation or general liability insurance. This can be a significant expense for your business and finding different insurers who don’t require a minimum FICO score to qualify might be necessary. 


Limits Your Vendors and Suppliers

If you have bad credit, you may find it difficult to pay vendors and suppliers on time. If a supplier is hesitant to extend credit to you because of your low credit score, it may seek payment upfront, require you to pay with a cashier’s check, or require you to pay higher interest rates. Vendors may also be unwilling to negotiate the price of their services or products. Bad credit can also make finding a reliable distributor or supplier for your products more difficult. If you’re starting out, you may have a more challenging time getting a distributor or supplier to work with you at all. Even if you do find a distributor willing to work with you, that person may require you to pay upfront or provide a large down payment.


Reduces your Ability to Offer Different Payment Options

If you want to offer your customers payment plans or other flexible options for paying their bills, you may find getting approved for merchant accounts impossible. Credit card companies require payment processing companies to verify your credit score to be approved for a merchant account. If you have low or no credit, you won’t be able to get a merchant account and accept credit cards at all. While many small businesses use a payment processing company that doesn’t require a credit check, you may be able to get a merchant account with bad credit, but this can increase the costs associated with accepting additional payments.


Affects Your Ability To Grow

If you have poor credit, getting financing for your business might be challenging. If you can’t get funding, you may have to bootstrap your business, making it more challenging to grow. You may have to get creative when financing your business if you have bad or no credit. While there are a few different ways to fund a small business if you have no credit, they are often much more challenging than financing through a bank or credit union.



Bad credit can have a significant impact on your small business. You may be unable to find reliable suppliers and distributors, get a business loan, or even get a merchant account to accept credit and debit cards. Having poor credit can be costly, but it’s not impossible to overcome. You can build your credit score by paying off old debts, paying bills on time, and applying for new credit only when needed. Once your score improves, you’ll be able to access the necessary financing and services that many small businesses rely on.



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