Having no credit is a challenge in the financial world, especially if you want to start a new business. If there is one thing that a business needs, it is startup capital and it takes credit to get that capital. So, if you have bad credit are you locked out of the business world? Of course not, you just may have to work a little harder.
Where there is a will, there is a way. If you are looking to start a business right now, there are some ways to work around no credit and even bad credit situations. Here are three examples of how you can do just that.
Fund Your Company Online
Local banks are tough. They have some pretty tight lending qualifications, and it often seems like you need to show them that you do not need money in order to borrow money. If you have struck out with local lenders, there is an alternative, the online lending market.
Online lenders may be able to help you get financing, even with poor credit, but they can be hard to find. Most of these lenders will be small companies or even private individuals and you need help getting in touch with them. This is where online websites like Loan Monkey come in.
Loan websites like these can help you get access to a lender that you would not ordinarily be able to reach. One of these lenders just might be able to make you an offer that can get your business off the ground.
Obviously, interest and loan fees will be higher than what you might find from a local bank, so be careful with online lending. Make sure that your business plan is sound and that you can afford to make your loan payments while your business grows. You cannot count on your business being profitable from the beginning, because most will not be.
Lean On Your Family & Friends
What better way to fund a company than by leaning on those that believe in you the most, your friends and family.
The best part about this option is that you can borrow for little or even no interest. Between that and the fact that your family and friends will be more flexible on repayment than a bank, you may just find yourself in good shape to make a run at self-employment.
There are a few negatives with borrowing from family and friends, however, but you can navigate around them if you are smart.
Unless you are from a rich family, the amount that you can borrow will likely be limited. This just means that you must be smart with how you spend your money. Whittle your start-up supply list down to the bare minimum while eliminating as many unnecessary expenses as possible.
Another problem is the potential for hurt feelings when dealing with family. Make sure that you take the loan seriously and pay it back as soon as possible. Keep your friends and family in the loop, so they know that you have not forgotten about them. Make them privy to details about your startup, so that they know their money was not simply thrown down the drain.
Self-Fund A Low Cost Startup
Not every business takes 6 figures to start. A lot of companies can be established for well under $10,000 and some for as little as $1000. This is well in the range of a business that you can self-fund with a credit card or from a basic savings account.
So, what kind of business can you start for under $10,000? Think about the service industry. Companies that offer maid services, house painting, and even dog walking can easily be established for under 5 figures. You likely have transportation and all the tools to do these jobs already. If not, the equipment needed to start these businesses is low cost. If you have one free credit card, you probably have enough capital to get a service business off the ground.
There is one problem of course with opening a low-cost startup, lack of funds for advertising. While the equipment needed might be cheap, advertising is not. Luckily, businesses like these do very well from word of mouth. Set up a Facebook page and simply do good work. Ask your customers to refer you to their friends and watch your business slowly, but steadily gain new clients. With low startup capital businesses, networking is key.
To Sum It All Up
Starting a business with no credit is possible, but it will take work. Much more work than you might have if you started a company with good credit and a well-funded bank account.
That being said, the dream of becoming self-employed is available to you even if you are lacking in credit. What you lack in credit, you will just have to make up for with drive and determination.