So, you want to get a business loan with bad credit?
Obtaining a business loan can be tough if you have bad credit. Fortunately, there are more than several options for you to choose from so if you credit score is holding you back from starting up your own business, you might check out these helpful tips for the needed funding.
Don’t forget that bad credit score is something you can’t avoid and if you want to start your business, it’ll follow you almost everywhere. The trick here is to get your credit score on the right track and you’ll have almost unlimited possibilities for you take advantage from.
Don’t forget that you are an entrepreneur, and entrepreneurs don’t give up that easily. So, here are some helpful tips and tricks on how to obtain a business loan with bad credit.
How can I get a business loan with bad credit?
1. Family and friends
When you talk passionately about your idea, people will hear you out, think of you as
someone who wants to succeed in life and this is most likely the main reason why most entrepreneurs get start-up capital from relatives and friends. If anyone one wants you to succeed in life and turn your dream into reality it’s the family and friends.
Moreover, they most likely won’t care about your poor credit score because they believe in you and on top of all, they won’t charge any interest. Well, some may.
On the other hand, if you would talk so passionately about entrepreneurship to a bank, they would look at your credit score and at your business potential.
Here is a reference from real life. If Howard Schultz gave up after being turned down by banks 242(!) times, there would be no Starbucks today.
2. Government gifts and grants
When it comes to government gifts and grants, be careful as you are on the Internet and there are lots of services that promise you free government grants. Do not these services, as most likely you will get scammed.
You’ll have to do the legwork for yourself to see if government grants are available for the business you are in. Usually, low-income areas tend to qualify for grant money as government’s main goal is to help you in business because in the long term you are helping your country as well.
When I’m talking about free gifts, I’m talking about free office space from former employers, friends or relatives. You can also look for free business services from relatives and friends as well. Be creative, when it comes to your start-up, try to reduce costs by brainstorming with a group of people you trust.
3. Web-based lenders and microlenders
You may have heard about nonbank lenders on the Internet. In most cases, these loans range from $5,000 up to $25,000.
These sites are a great place to find a potential lender and if you want to start a business with bad credit, this might be the place you were looking for.
Some of these sites are:
- www.count-me-in.org (women only, sorry guys!)
www.americaonefunding.com (apparently the company is not working anymore.)
Unfortunately for borrowers, the interest rate tend to be relatively high if they have a bad credit score. Actually, the rate can go as high as 20% for certain individual with bad credit.
On the other hand, you can look for microlenders in your local state as these types of lenders offer a bit more flexible terms. Usually, they don’t even have a website so they might be a bit harder to find.
Some of a more reputable lenders are:
- Bentley Microfinance Group
- Business Center for New Americans
- Kiva Zip
- Justine Petersen
- Access to Capital for Entrepreneurs
4. Have you tried looking for a cosigner?
If you have problems obtaining a loan for your business, you might need a help from a cosigner. You might need a cosigner if:
- you have bad credit history or no credit history whatsoever.
- you don’t meet the minimum income
- you changed job frequently
These are just some of the possible requirements. Again, you can try reaching out to a trusted relative or friends who should have a good credit history.
Also, when it comes to paying back you loan, you have to be as responsible as possible. If your friends or a relative cosigned a loan, he or she is doing you a favour, and you must respect that. Moreover, if you don’t pay back your loan, your cosigner will be held legally responsible.
Hopefully, if everything works out in your favour and you have a functioning and established business that is making your steady money, you can finally begin looking for a proper loan at you local bank as they will give you a loan under better terms.
All in all, lending money to start your small business can be a very smart move if you believe it will work out. Of course, lending money is an important decision and if you can’t pay back the loan, you will be legally responsible.
Good luck with your business ventures!