You’ve taken the leap and decided to start your business – except there’s a problem. You need money for your startup, but your credit isn’t so great. In fact, it’s downright bad.
What do you do if you need funds and financial backing, but you don’t have an excellent financial track record? Don’t give up, because there are ways you can secure capital for your fledgling business.
Here are some tips for locating business loans when your choices seem limited.
When you have bad credit and are starting business, two things must happen: You need to find the money to fully support your business plans, and you also need to find a way to grow your credit score and improve it. Obtaining financing can be a challenge, but once you do, you’re on your way to setting up shop as well as rebuilding your credit worthiness so, in the future; you can obtain loans more easily.
According to Entrepreneur Magazine, traditional bank loans only account for one-quarter of the money obtained by entrepreneurs with new startups.
That’s What Friends Are ForAlthough you might not want to ask, you should consider discussing your startup with your family, extended relatives, and close friends. While you may not be able to get a complete business loan from them to support the entire launch of your business, you may be able to secure the majority of funding to get the ball rolling. Most of the time, your reputation and reliability are well known to the people closest to you, so while they won’t ask for a credit score before fronting you a business loan, they will have an idea of how dependable you are.
Another option would be to ask them to co-sign a loan for you, using more traditional financial resources. Regardless of which path you choose, it’s important to make good on your promises to pay back the loan, and you should insist on a professional loan contract so each person involved can have peace of mind that all matters are understood, agreed upon, and aboveboard.
Look Beyond Big BanksOnce again, traditional bank loans are in the minority when it comes to business startups. Where else can you get a business loan? There are smaller lenders out there – known as microlenders – as well as online lenders that do business solely over the internet. You will need to research these types of lenders and be sure they are legitimate, of course, as well as comparing the rates they offer in addition to their rules and regulations.
If you are a woman launching a startup business, you may want to check out Count Me In or Magic City Capital. The latter is a resource site particularly targeted toward women seeking business loans and additional education while launching their own company.
Although it may be more challenging to secure a business loan if you have bad credit, that doesn’t mean it’s impossible. By following the suggestions above, you can find a way to get your startup running with a line of credit and rebuild your credit score at the same time.
Contributor: Bev Sninchak is a veteran freelance writer with 16 years of experience producing content for various publications. She writes about many subjects, from blogging advice to acquiring auto loans for bad credit.