Most people give up their American dream of building and running their own company because they have no credit. But, did you know that, when Walt Disney decided he wanted to start Disney World, he had no credit – at least not according to the banks he approached? He found a way to create and sustain one of the grandest empires in the world. Here’s how to create yours.
Get a Revenue-Based Loan
According to loan specialist Bad Credit Business Loans (BCBL), some of the best bad credit business loans are actually revenue-based loans. Revenue-based loans allow you to borrow up to 10 percent or more of your revenue from your bank. The key to making this strategy work is to have solid revenues and a good business plan.
You deposit income with your bank, and establish good gross revenues. Then, you ask the bank for a loan, securing part of your bank deposits as collateral. This helps you build the credit you need to borrow more, unsecured.
Raise Money Through Factoring
If you have bad credit, and you need money, look to your unpaid invoices – a major source of your cash flow problems. Unpaid invoices from clients, you can raise money through factoring. Factoring is a process whereby you sell your invoices to a third-party factoring company at a discount, usually 80 to 85 percent of the full value of the invoice. You get money now, but lose all future claims to the invoice. It’s not always a good deal, but it’s better than not getting paid anything.
Use Someone Else’s Good Credit
If you can get someone to co-sign on a loan with you, do it. Yes, they will be taking on the risk with you, and sometimes they will share a disproportionately large amount of that risk but, if you make them a partner and you have a solid business idea, they will also ultimately benefit.
Life Insurance
Life insurance is the Rodney Dangerfield of financial products – it gets no respect. But, the greats, from Walt Disney to Ray Kroc (the man who made McDonald’s the empire it is today) to Standford University’s Leland Stanford to James Cash Penny (founder of J.C. Penny) to the Pampered Chef founder Doris Christopher and Foster Farms’ Max and Verda Foster all used cash value life insurance to either start their respective companies or solve major cash flow problems.
Of notable interest is Walt Disney and James Penny. Disney could not get his project off the ground without mortgaging everything he owned, including all of his cash value life insurance policies.
Penny needed his life insurance policy to stay afloat during the 1929 stock market crash – it was the only substantial asset he owned that had not lost value. If you have one of these policies, whole life or cash value universal life, consider using it to help get your business off the ground. If you don’t have one, it might be a good idea to start one in the event you need funds later on (almost all businesses do).
Retirement Funds
If you have saved any money in your IRA or 401(k), you may be able to use some of this money to help start your business. You may need to pay fees or penalties for this privilege, however, so this should be the last place you look for cash.
Jason Taylor is a small businessman of many years. When he gets some time off, he likes to sit down and share what he has learned over the years. Look for his informative and interesting articles on a variety of websites and blogs.
