How to Start a Business When You Have Bad Credit
When trying to start your own business, your personal credit score can be one of the main hold-ups to getting the funding that you need. There are many ways around this that do not involve cleaning up your personal credit such as equipment lenders and asset-based lending. Each of these ways will give you a chance to start your company and get earning so you can improve your credit for the next growth stage of your business.
Social lending sites offer a space where members can lend and borrow money with unsecured personal loans. These will usually have better rates than traditional loans and you can get some advice along the way. As a bonus, when your business gets stronger and more established, you can pay it forward and lend to another business that needs help.
When you go through lenders specifically designed for equipment loans, your credit score becomes less important than the equipment you need to run your business. This is because it is a secured loan from specialty lenders, meaning that if you default then they get to take back the equipment and lend to someone else.
Some smaller lenders are more apt to extend loans and credit to small business owners than larger banks or credit unions. These organizations, sometimes non-profit or sponsored by the Small Business Administration, can help you grow your business from the bottom up with loans and advice along the way.
Another type of secured loan that you may want to consider getting is an asset-based loan. This asset can be your residential or commercial property, your stock of seasonal products and much more. The value of your asset will be determined by a qualified third party chosen by the lender and your loan will be based on that value. If you default, then the asset is taken and sold. You should make sure that you will not be liable for any additional recourse before you take out the loan.
Having a bad credit score does not have to be the end of the line for your startup, but it may mean looking into alternative lending options. You can find equipment lenders, micro-credit unions and social lending groups to help you with both finances and business advice. You can also use your assets as collateral for a loan to help you get started and grow.