4 Tips to Starting a Business with Bad Credit
Chasing your entrepreneurial dreams involves a series of what-ifs and leaps of faith, but in addition to your persevering pursuit as an aspiring business owner, you also need…
Chasing your entrepreneurial dreams involves a series of what-ifs and leaps of faith, but in addition to your persevering pursuit as an aspiring business owner, you also need enough funds to build your vision into reality. While taking out a business loan can help get you started when you’re strapped for cash, what can you do when you have a bad credit score?
It may be tempting to look at your peers and friends with perfect credit scores and think they have it easier than you. While it might be true that someone with perfect credit scores can secure a business loan without a hitch, it’s not to say that someone with a bad credit score can’t be approved for a business loan.
In fact, there are some creative alternatives to bank loans out there, and if you’re willing to do your homework, you can find a business loan that works for you.
Tip #1: Get Help from Social Lending Sites
Social lending sites are an excellent way for people with a bad credit score to raise money for a business loan. These sites connect potential borrowers with lenders who are willing to offer to finance but are also less stringent in their qualifications for loans.
For example, with sites like Head Start Biz Solutions, a borrower’s credit score does not affect the amount of money he or she can request, though borrowers with lower credit scores do pay higher rates of interest.
Tip #2: Join Micro-Credit Organizations
Although not specifically for people with a bad credit score, credit unions and micro-credit organizations offer similar systems for getting a business loan to people with all types of credit scores. These organizations are known for their non-profit status, so interest rates for loans tend to be lower than those offered by banks.
In fact, many micro-credit organizations that provide business loans to people with bad credit won’t even look at your credit score. Instead, these organizations only look at the amount of money a person needs and the amount of money he or she can offer in equity, thus creating a zero-equity loan.
Tip #3: Get Financial Aid from Equipment Lenders
Similar to business loans, business finance companies offer short-term equipment financing with flexible terms to people with all levels of credit scores. They provide money for everything from computers to manufacturing equipment and are often willing to lend to companies with bad credit scores if the borrower can offer a significant amount of personal debt.
Tip #4: Jumpstart Your Start-Up Using Grants
If you need start-up funding for your business, but you have bad credit, then you’ll want to look into public and private grants that offer financial assistance to entrepreneurs in need. Cash grants typically require no repayment, and they’re offered by several state, federal and private organizations.
For instance, the SBA offers grants to businesses in advertising and marketing, consulting services, and capital improvements.
The Bottom Line: Steering Your Start-Up Towards Success Even with Bad Credit
While it’s true that people with bad credit scores may have to jump through a few more hoops to get a business loan, it’s absolutely possible to secure financing with a bad credit score. You’ll just have to be willing to look for creative and alternative ways to get the financial assistance you need.
How Can Head Start Biz Solutions Help You?
If you’re thinking of starting your own business in Virginia, Head Start Biz Solutions is here to help you. Our team offers consulting and real solutions to current projects to help new and seasoned entrepreneurs structure their businesses and prepare their companies for the future.
We offer credit restoration, business funding, business formation and planning, tax services, customer relationship management, and more. Learn more about how we can help you today!
Related desks: Business funding