Every great entrepreneur has a story about being dirt poor. They may have been down to their last $50, as a result of financial troubles. Yet, what kept them going was a strong belief in their ideas and purpose. Does this sound familiar? If so, you might find the following tips for securing startup loans with a bad credit score helpful:
Consider Web-Based Lenders and Microlenders
Microloans are available to small business owners through nonbank lenders online. These loans can be as high as $50K. In addition to being available to individuals with poor credit score ranges and more serious financial implications, your payments will be reported to the credit bureaus, which can go a long way in rehabilitating your credit score. Since each site has different ways in which they spread risk and price loans, be sure to compare rates before deciding on a specific site.
Consider Grants and Gifts
This applies to business loans as well as personal loans on bad credit. Understand that your credit score will determine on which sites you can apply and get approved.
This isn’t a loan, but every entrepreneur should consider getting money in the form of grants or gifts to avoid taking on more debt payments, which may have gotten you in trouble in the first place. This is not an easy process, and be extra careful with services that promise to find the perfect government grant programs for your needs. Grant money tends to be more readily available for tech companies, retail businesses, and healthcare businesses in low-income neighborhoods.
Talk to Your Friends and Relatives
Entrepreneurship is at the core of the American Dream. Therefore, we are more likely to support enterprising individuals. In fact, more than half of all business owners report that they have received some financial assistance from relatives or friends. Those close to you want to see you succeed, and often times, they would be honored to have you ask for help. The key is to treat this like any other business loan: draw up a contract and keep them in the loop about what is going on.
You Don’t Need Bank Loans or Credit Cards
Only about a quarter of the total funding needed for early-stage business owners comes from bank or credit card financing. This means that at least 75% of the startup money you’ll need can easily come from sources that don’t rely on your credit score. Of course, there are lending programs and credit cards geared toward people with poor credit, but they have high interest rates and should be avoided.
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