Meet the Other Phone. Flexible and made to last.

Meet the Other Phone.
Flexible and made to last.

Buy now

Please or to access all these features

Money matters

Find financial and money-saving discussions including debt and pension chat on our Money forum. If you're looking for ways to make your money to go further, sign up to our Moneysaver emails here.

How to fund small business start up with poor credit rating.

9 replies

Paynefully · 10/10/2023 12:54

My credit rating is poor but I’m looking to start a small business locally.

I need about £3000 to buy the business from somebody else and get myself set up. But with my poor credit rating I’m going to struggle to get a loan aren’t I? Is there any alternative like gov grants/funding? I can’t afford it out of pocket so I’m looking at alternatives. Or should I just accept that I’m never going to open my own business?😅

OP posts:
Superhair · 10/10/2023 13:35

What kind of business is it for £3000.

BarbaraofSeville · 10/10/2023 14:07

Can you pay for it over time?

Can you get a second job to earn extra money to pay for it?

Starting the business in debt may make it harder to run profitably. Will you need to buy stock, pay staff, refurbish a premises etc?

Can you open your own business of a similar type elsewhere without needing to buy an existing one? How sure are you that the business is worth £3000? What is this buying you?

user1497207191 · 10/10/2023 14:16

Can't you buy it from the seller over several months by monthly payments out of the profits it's making? That's a pretty common method, i.e. vendor finance, for tiny businesses.

But as others have said, have you actually checked it's worth that? What are you actually paying for? Is the stock, equipment, etc actually worth that much? Is the stock actually sellable and is the equipment in good condition etc?

It's not good to have to borrow to buy a business as it's never the end of the financial requirements. How are you going to finance buying more stock, or advertising campaigns, or new equipment/vehicle when they break down, or customers who pay late or don't pay at all? Small business is always high risk and you really need a good buffer behind you.

As an alternative, can you not "shoe string" a business, i.e. start your own on a shoe string, get a bit of income from modest beginnings/minimal equipment, and then build it up slowly - far more likely to survive if you do that as you don't have loans to repay on top of earning your own wage to live on, all on top of business costs, etc. Lot of businesses can be set up on much less than £3k, especially "labour only" businesses, so can't you start doing that instead, build up some savings, and then think about buying someone else's business?

Paynefully · 10/10/2023 14:51

It’s hiring out children’s party items so it’s basically just buying the equipment and social media

OP posts:
DoubleHelix79 · 10/10/2023 15:00

There a tons of grant schemes out there - do spend some time looking into them. A good starting point would be to Google your local chamber of commerce, they often have a dedicated team to support entrepreneurs, and the to have websites that signpost various grant/loan programs.

Superhair · 10/10/2023 15:01

I would look at getting a job and or doing overtime to purchase the play equipment yourself and build it up a similar business over time.
£3000 is not very much for a business and I can't imagine they are making that much profit for it to sell at that price.

DoubleHelix79 · 10/10/2023 15:02

You'll likely need a business plan for any of these - financial forecasts, market analysis etc, so you may want to start putting a document together now

recyclemeagain · 10/10/2023 15:09

Not sure where you're based but maybe worth contacting Business Gateway for advice on this. It's exactly the kind of thing they were made for and they can let you know if there's any grants or funding locally available for you. I used them when starting up my business and found it quite helpful. Also, how bad is bad with regards to your current credit rating? ClearScore are good for keeping an eye on that.
As others have said, make sure the business you're planning to buy is actually worth the £3K asking price. It may be cheaper to set up entirely from scratch yourself.
Good luck.

helenush · 20/06/2024 10:37

Starting a business with a poor credit rating can be tough, but it doesn't mean you can't pursue your dream. I've heard from others in similar situations that small business grants could be a game-changer. They offer funding without the burden of loans and can be tailored to different business needs. Exploring these grants could open up possibilities you hadn't considered.

Another approach could be seeking out local business support organizations or incubators that offer mentorship and funding opportunities specifically for startups.

New posts on this thread. Refresh page