Did you know that there are nearly 28 million small businesses in America?
That’s a lot of hard-working, driven individuals going after their visions and making dynamic change happen.
Have you always dreamed of opening your own business and being your own boss? Don’t let bad credit discourage you from pursuing your entrepreneurial hopes.
We’ve got you covered with how to get started- no matter your credit score. Let’s get to it!
Know Your Credit Score Before You Fix Your Bad Credit
If you don’t actually know your credit score, it’s hard to know if you have good or bad credit.
Fortunately, it’s easier than ever to obtain this number. Today, many banks and credit card companies provide free credit scores for active customers. There’s no excuse for you not to know your current financial standing.
Whether you like it or not, your credit score will impact your ability to receive traditional loans.
Typically speaking, most banks evaluate potential borrowers based on their credit. If you have a score lower than 630, you may struggle to receive approval from traditional banks. This number falls in the “average/ok” credit score, and most lenders want that number above 680.
That being said, knowledge is power. Check your score thoroughly- make sure there are no errors, and start from there.
Many banks have hard and non-negotiable rules when it comes to approving potential entrepreneurs. That means if your credit score falls below a certain threshold, you will be automatically denied.
Identify Your Financial Needs
When you’re just starting out in mapping your business goals, it can be hard to determine your potential budget.
With that said, it’s still important to have a basic roadmap. You’ll want to narrow down how much initial money you’ll need and how much you’ll need later.
Keep in mind that most businesses do experience negative cash flows at the beginning. You need to account for that- and you also need to account for potential losses in your primary stages.
While your financial needs don’t need to be overly complex or detailed, you do need to be able to provide a total sum before you seek out a loan.
After all, if you walk into various institutions asking for money without having backing and reasoning for why you need that specific amount, you’re going to look highly unprofessional. Not the image you’re probably going for, right?
Consider Microlenders and Nonprofit Agencies
If you have already confirmed that you have bad credit, it may be best to just steer away from traditional bank institutions altogether.
However, don’t rule out the power of micro-lenders and nonprofits. Many of these companies specialize in helping disadvantaged or minority entrepreneurs, and you just may score a significant deal because (not in spite) of your financial status.
To qualify, you’ll want to do your diligent research, create a tight and responsive business plan, and demonstrate a willingness to improve your bad credit.
By showing this initiative, you can improve your approval chances.
Ask Friends and Family
Many successful entrepreneurs get their financial startup directly from their loved ones. Chances are, the people in your life want to see you succeed, and they may be willing to help transform your business dreams into a reality.
With that said, they’re less likely to be deterred by bad credit than, say, a traditional lender seeking immediate payment back.
Consider the legal ramifications of asking friends and family. Each state has different tax implications regarding private loans vs. cash gifts. Consult with an attorney or tax accountant to get the full picture.
Apply for Hard Money Loans
Hard money loans work directly with your money and your business. These companies act as both lenders and loan committees. Best of all? They work incredibly fast, and you’ll receive your money in just a few days.
Unlike financial institutions, you can often secure pre-approval and approval without going through a bunch of hoops and battles. That’s because there are fewer requirements (income history, credit score, experience) taken into consideration.
You can use these companies for a variety of reasons, such as construction loans, purchase loans, and even line of credit loans.
Finally, bad credit is not a big issue when it comes to securing hard money loans. There is simply less emphasis on your credit score because the lender bases his approval based on borrower equity, property value, etc.
If you meet that criteria, you have a really good chance of getting approved and funded.
We’ve all seen those rags-to-riches, viral Internet phenomenon. If you have a dynamic idea but struggle with bad credit or simply no money, crowdfunding may be a viable solution for you.
Here’s how it works: Crowdfunding capitalizes on using Internet attention to pitch hundreds of thousands of people to spark interest in your idea.
For example, the largest organization, IndieGoGo, advertises raising more than $1 billion for potential, hardworking entrepreneurs.
It’s easy to get started: you raise the starter capital needed to try out your idea, create your company, and tap into the network’s millions of members to attract your very first customers. After that, you acquire the tools you need to create your business.
Final Thoughts on Starting a Business with Bad Credit
Don’t let your past financial mistakes or fallen times get in the way of you following your entrepreneurial dreams. If you’ve got a killer business time, now is the time to take action!
Interested in applying for our fast funding options?
Contact us today! At Hard Money Georgia, we’re happy to help you achieve your goals, and we’re here for you every step of the way.