Start a Business if You Have Bad Credit
At some point in your business venture, you are going to have to go looking for money. You might need to this money at the outset of your business startup to help buy equipment, hire employees, and conduct market research. You might also find yourself in a jam at other points in your business development when your cashflow runs dry, you struggle to collect accounts receivable, and your clients are converting to your competition.
There’s no need to worry if these things happen because you can just go get a loan from the bank. But what do you do if you have bad credit? What if you are denied a bank loan or other traditional means of financing your startup and growth stages? You might be inclined to quit before you start, but don’t fret; there are options out there that can help you rebuild your credit, establish your business credit, and keep on truckin’ toward the future. Here’s how you can start and grow a business if you have bad credit.
Get a Cosigner
The fastest and easiest way to access credit when you don’t have any, or you have poor credit, is to get someone to cosign a loan for you. The terms and rates of cosigned loans on poor credit may be higher and more stringent to obtain, but it’s not impossible. Basically, you are relying on the good credit of your cosigner to ensure that the loan will be approved. Your cosigner is going all-in on your idea and business by saying that they’ll “go good” for your loan should you not be able to make the payments. It’s not an easy thing to ask people to be a cosigner so if you go this route, be sure to have a contract in place and have a frank discussion about what it means if the loan is not paid back.
How will your friend, family member, or business partner recoup what might be lost? If you can’t find a friend or family member to cosign, bring on a business partner. It’s important that you are honest with them upfront about your credit and that you need them to invest in your business this way so that you can both succeed. A good business person and someone who has experience investing in businesses will know whether or not you are a good risk, but make sure you go out of your way to make this person feel appreciated and important in your business.
Get a Merchant Cash Advance
If you are already up and running when your business hits a slow season, you might be inclined to run to the bank for a loan to hold you over, but there are other ways to get your hands on cash that you need to keep going until things pick up again. If you run a retail shop or have an online presence with an e-commerce site, you might be able to get a merchant cash advance directly from your credit card processing company. It turns out that these advances are not the same as loans, have smaller fees, and are easier to get approved than a traditional loan.
Because you already have a history of transactions with the merchant holder, they can review your account, determine how many sales you have and assign a value to those transactions that you can borrow against. Instead of repaying the advance out-of-pocket, the merchant company simply deducts a percentage of every credit or debit card processed on your account until the advance is paid back. No co-signer or credit checks needed. Knowing options as these exist can help you out of a bind so you can continue to grow your business in your own vision. While bringing on a business partner is ideal for some, if you are a small business owner looking to maintain control of your operation and future, then a merchant cash advance is the right solution for you.
Whether you’ve been dreaming of owning a business for years or an opportunity just appeared before your eyes, ensuring that you have access to the money you need to start and grow your business is an important part of your future success. If you are living “paycheque to paycheque” as a business owner, the stress and fear of having to shut down can become too much. It’s best to start with a few months’ worths of capital in the bank and make sure you have a strategy for getting yourself out of tight spots during slow seasons and downturns in the economy. You never can tell what might happen but that’s no reason to not go after your dreams.