Published By Nikeya Williams at August 17, 2017
Starting a new business for some entrepreneurs can be hard when times are rough, especially for business owners looking to get their business off the ground. But it can be even tougher for business with bad credit.
Business owners with bad credit have credit score somewhere between 300 and 629, having a score in that range can be a huge obstacle for any business owner looking to fund a new business. Although it may be hard to overcome, having bad credit shouldn’t stop new business owners from looking for money.
Normally, online lenders are more generous and they give out loans to business owners with bad credit, but they aren’t likely to give a loan to a new startup with no liquid assets. A lot of times when business owners have some type of capital to put in their business, whether it be from a personal savings, retirement, or loan from family or a friend, it will help to show lenders that you have (cash on hand).
But if you don’t have the cash right now in the bank and your credit is bad, here’s how you can fund your business:
Nonprofit and Micro Lenders: If you’re business owner, and your credit score is between 300 and 629, then you’ll want to start looking for a nonprofit and microlender to do business with. Nonprofit and microlenders typically establish loans with the bad credit borrower in mind. Most of the Nonprofit and microlenders loans are geared towards helping women, minority entrepreneurs and people that come from a lower-income and economically disadvantage community.
What are Microloans: These are loans that are primarily used by small businesses with bad credit, or they can’t get a traditional loan from the banks.
Develop a Business Plan: Another way to improve your chances of getting a loan with bad credit is to develop a rock-solid business plan that shows you working diligently on fixing your credit. You want to show potential lenders that you are determined to get your finances in order, and you have a plan to execute your goals.
Take small steps in getting your finances in order: You could be facing a huge mountain of debt, and it could take years to pay down your debt. It’s good to approach paying off your debt in a realistic and systematic way. Let’s say that you have a lot of credit card debt, and you have fallen behind in all your payments on your credit cards. The first step that you’ll do is to start making your credit card payments on time. Make sure that you’re diligently making payments on time. This is key if you have bad credit as a business owner. Lenders will not want to give you a loan when you’re already behind on your current payments and obligations.
Social Lending sites: Get funding from a social lending site such as kickstarter.com and indiegogo.com. These sites help thousands of startups and new businesses get started by using money from the general public to launch their business. The money that’s acquired from social lending sites comes from contributors that receive perks or products in exchange for the money that they donate. There have been millions of dollars raised for startups through social lending sites. Typically, what you would do to raise funds through a social lending site, is to start a campaign consisting of a video explaining your startup or project. But you have to remember that there’s no guarantee of success with social lending sites. Kickstarter statistics show that nearly 60% of projects that don’t get funded, and only about 8% of all projects launched have raised $10,000 or more. If you decided to go with social lending to fund your business, make sure that you’re approaching the idea realistically.
Looking for money, loans, credit cards, etc., to start a business can be a tricky task, especially if you have bad business credit. It may look impossible to start your business with bad credit, but it’s not anything you can’t work through. Develop a plan to get out of debt and follow that plan, but as you’re waiting to get out of debt, keep your options open to pursuing unconventional ways to get money for your business. Kickstarter.com is a great way to start looking for new ways to fund your business, even though it may seem like your chances are slim to none to get money from social lenders, you should try it anyway. Don’t get discouraged if all your plans fail, just develop a new plan and execute it with confidence.