It is true that starting a business with bad credit is difficult but it can be done. Not all budding entrepreneurs have a steady financial foundation to support their venture and that is ok. It should not stop you from fulfilling your dreams even if that dream is to trader online. If multiple banks have refused to give you a loan, there are other options bedside giving up.
Let us be honest, you cannot run away from a low score. The trick is to fund your business in ways that will actually improve your score. You will then be ready to move our business to the next stage and stop being slammed in your face when it comes to funding.
So what are your options? Have a look…
Approach Non-Profits and Micro-Lenders
Whenever you are in need of a startup loan and your credit is bad, look for such institutions who have a risk appetite that is different from a traditional bank. In other words, reach out to micro-lenders and nonprofits. They hardly judge on your score.
Chances are you could get a nice deal. Usually, when you have bad credit, you are only given expensive financing options. However, that is not the case with the above-mentioned institutions. They are designed to help such a group of people. The interest rate may still be high but not as high as a bank would charge.
Ask Your Relatives and Friends
If you think you do not stand a chance, then you can always seek help from friends and relatives. If they are the kind of people who would support your business idea, they will not hesitate to help. For them, your poor credit score may not be a problem because they trust you already.
If they do not have funds but they have a good credit standing, ask them if they can co-sign on a business loan. This would get you some funds and improve your credit score at the same time. Remember that this is risky because if you become a defaulter, your co-signer will have to pay back the loan.
Try Peer-To-Peer Lending
Several peer-to-peer lending websites are accepting borrowers with low credit. It is important because they can understand you better and getting such loans can improve your credit for a business investment. These platforms do not lend you money directly; they act more like an intermediary between the investor and you. The downside of P2P lending is that they impose a higher interest rate than usual.
Fix Your Credit While You Can
If you have bad credit because of a mountain of credit card debt, you must first address this problem. Those who have fallen behind on their payments set your finances straight. The problem is if you were already behind, nobody would want to work with you. Maybe not even your relatives. You want to be seen as the one who is trying their best to meet the obligation.
You can also come up with a plan to pay your credit card bill. Make the lenders believe that you will make all the outstanding payments in a couple of months. Some nonprofit lenders are willing to help if you can at least get started on paying your loan for a couple of months.
Fixing your credit will take time. After you successfully get a loan to start your business, this will allow you to demonstrate the viability of your venture. It will take a year and then more financial options will open up for you.
Don’t Apply for Anything New
Applying for unnecessary credit can instantly make your credit worse. Since you have bad credit already, applying for a new card or loan and being rejected will hurt your score even more.
Avoid the Damage While Being Proactive
There is no startup that can get off the ground without personal investment. You might have convinced yourself to use savings but do not wait on reaching out a lender until you run out of funds.
It is extremely important to structure your business initiative. This will help you keep your business credit separate from personal credit. These methods to finance your startup may be great but do not forget that you will still need a plan for repaying the interest plus the borrowed amount.
If you were planning to sell your (if any) to CFD broker fund your venture, hold on. Try the said options first; one thing is for sure, launching a business with bad credit means you will have to make many changes to your lifestyle. Most of all, it calls for rigorous financial planning. Do not hesitate to take the first step. Good luck with your venture!