Starting up a new company is an exciting time, and for entrepreneurs some say that there has never been a better time to get their ideas out there, and start creating opportunities for themselves and others. In fact, there are over 27 million self-employed entrepreneurs in the US, and the trend is growing.
But it’s not as easy as simply having a good idea and making money from it. Unless you have a large amount of savings, or are already making money in another business that you own, you will need some form of capital to get things going. If you have personal financial problems, that can cause a knock-on effect when it comes to getting your start-up capital together.
Loans
If you have poor credit, a history of missing payments or making late payments, or you have filed for bankruptcy, it could be difficult for you to get a business loan. It works in the same way as if you applied for a personal loan, and your bad credit can stand in the way of you getting the money you need. Banks need to be sure that they will get their money back – with interest – and won’t lend to anyone who has shown that they have had problems paying loans back in the past. When it comes to new businesses, the risk is doubled as there is no certainty that the company will yield enough money to pay the loan back either.
Investors
Although investors may be more likely to lend money than a bank, those who do this on a regular basis will want to delve into your finances just as much as any financial institute would. That means that you can’t hide the fact that you’ve had trouble in the past when it comes to meeting your financial obligations. If you are able to find an investor who will be happy to put the money into your new company, they may request a much higher equity share (due to the heightened risk) than you had ever intended to give away. And although you may think it’s perfectly reasonable to try to negotiate with the money guys a la Dragons’ Den or Shark Tank, it’s not. They hold all the cards and you either have to accept their terms or walk away.
Solutions
It may feel as though there is nowhere to turn if you have poor credit yet want to start a business. It’s a bit of a ‘Catch 22’, because although you are quite sure you know how to make some good money, you can’t get started because you can’t get your hands on any of that good money! However, there is a solution in the form of family. Around 82 percent of all small business are launched thanks to loans from family and friends.
Although borrowing money from family should never be something that you expect to be able to do, if your family does agree to lend you the money then they probably won’t be concerned about your past financial problems. They know you as a person, rather than a set of number on a computer screen. Using property in a reverse mortgage loan can release enough equity to get your business up and running, and it can be interesting to see just how much you might be able to borrow this way. In case you cannot borrow money from your family, you can easily find a reverse mortgage lender who can give you a good deal.
If this option is not open to you and you truly feel as though your business idea could be successful then it may be worth your while to find a second job, and to save that money to put directly into your business. It’s hard work, but if you do your homework and get everything in place before you begin, it could pay off handsomely.
