Starting a Business With Bad Credit
If you have a low credit score then it can make starting a business more challenging, as aspects like getting a business bank account and applying for finances, will be much more challenging.
That said, where there’s a will there’s a way, and any good entrepreneur understands the importance of developing a positive mindset and being resourceful when it comes to turning their vision into reality – meaning they will find a way.
One of the most common struggles when it comes to starting your own business, however, is that of raising capital to launch – whether you have good credit or bad credit. Whilst many people ponder how long does something stay on your credit report before it is removed, the key piece of advice, is to get started today – as if you put your dreams on hold, and wait before the circumstances are ideal before taking action you will never get started.
Therefore, if you are in the position where you are needing to raise capital, but have a poor credit history, it’s wise to consider other ways to raise capital in the early stages of your business. Oh, and just to confirm, the term ‘capital’ relates to the money required to launch your business and get it off the ground.
Raising capital is rarely an easy task, and many people feel nervous at the prospect of approaching investors or even friends and family. This is natural, but it’s something that must be pushed through if you are going to start your business and make it a success.
There’s a popular saying that describes how a person becomes luckier the more they do something, and this is true of pitching your business, as the first few times can feel like a rude awakening that quickly conditions you into shape.
That said, there’s no reason you ever need to pitch your business to investors – as there are ways you can raise capital without having to undergo such a challenging process. It’s also important to note that most investors will request full financial statements of the owner, including their credit history, much like a bank would.
GET A BUSINESS LOAN
The most traditional route for people starting a business has been to get a small business loan from a finance company or a bank. This remains one of the most effortless ways to finance your business – but if you have poor credit, it might not be a viable option, and/or the loan would almost definitely need to be secured on an asset, such as a property.
FRIENDS AND FAMILY
Borrowing money from friends and family, or having them come on board as informal investors where they give you money in return for equity in your business (i.e. 20% of future profits for a particular amount of money) can be an accessible route of financing your venture.
The only thing to bear in mind is that it can come at a great social cost should your venture not turn out to be a success!
The recent trend of crowdfunding requires no credit checks. This is where you pitch your idea via an online platform and people offer money to back your idea, in return for equity or a substantial discount on the product you are creating.