Are you hoping to start a business with less than stellar credit? Starting a business can be intimidating and difficult for many reasons, but it can be especially worrisome if you have bad credit.
Bad credit history can make it harder to get approved by a loan from a bank. While there are other ways to take out business loans, typically, they’ll come with a lot higher interest rates than traditional bank loans.
But if you have bad credit, you shouldn’t let it destroy your dream of starting a business. Read on to learn how to start a business with bad credit.
1. Understand Your Credit
Before you get to work on anything else, it’s first important to take an honest look at your credit score and credit history. Understanding your credit will help you understand what kind of funding you qualify for and where to apply for funds.
In other words, it’ll help you be realistic about what’s ahead. Fortunately, getting a detailed understanding of your credit is pretty easy. You’re entitled to request a free copy of your credit report once per year. You can do this through any online source that’s government-mandated.
Once you get your credit report, you first want to take a look at it to make sure everything is accurate. Occasionally, incorrect information shows up on a report that can affect your score, so you’ll want to take care of this right away.
If you find anything suspicious, contact the credit bureau immediately to resolve the issue. Also, understand that a bad credit score is below 579. If your score is below this, you may want to work on boosting it before taking further action. You can work with the fastest credit repair company to boost your credit.
If it’s above this, you’ve got plenty of options still.
2. Consider Loan Qualifications
Your personal credit score is just one piece of the puzzle that lenders look at when deciding to approve you for a loan. Other factors they take into consideration include:
- Time in business
- Business credit score
- Business industry
- Debt load
Out of these factors, the most important one to pay attention to is collateral. If you can offer something valuable as collateral (such as a home or car), you have a better chance of getting your loan approved.
3. Consider Alternatives to Traditional Loans
Sometimes, there’s no getting around a bad credit score, and the bank won’t approve your loan. Luckily, there are plenty of viable alternatives to traditional bank loans.
Some of the best options include:
- Asking family members and friends for loans, or asking them to invest in your business
- Taking out a microloan (this is essentially a very small business loan)
- Using lines of credit
- Using a merchant cash advance
Each of these alternatives comes with pros and cons, so we suggest researching each option before deciding.
How to Start a Business With Bad Credit: Time to Begin
Now that you know how to start a business with bad credit, it’s time to get started. Don’t let bad credit hold you back from achieving your dreams. With the above tips, your business will be up and running before you know it.
For more financial tips related to starting a business, check back in with our site.