Are you suffering from poor credit and still need money for your start-up business? If yes, you might find it quite challenging to secure a new loan. As per the source , almost 543,000 small businesses are started each month in the United States. With a neck to neck competition, only half of the mentioned number complete 5 years of successful operation.
Ways to Get Start-up Loans with Bad Credit
Many of us often suffer from bad credit. Getting a loan with such a scenario becomes a little difficult. Let us delve into some of the options available to obtain small start-up loans with poor credit.
- Loans from SBA – Small Business Administration (SBA) loans are not given to all businesses. You should be lucky enough and spare a few months to qualify for a SBA loan. These loans can be used for purchase of equipment, real estate and working capital. It is available to present as well as start-up companies and is the cheapest financing option.
- Peer-to-peer Lending – If you have a bad credit and feel that you might not get a loan any further, try peer-to-peer lending. It works quite well if you need $50,000 to $500,000 for a period of 2 to 5 years. The interest rates will range anywhere between 9% to 21% and nobody bothers about your credit score.
- Borrowing from friends or family – It is a good idea to look towards your friends or family if you have a poor credit history. However, many of us either take them for granted or forget to send payments on time. Therefore, if you want to borrow from friends or family, make sure you get in touch with some lending companies such as Loankin, Zimplemoney, InvesNextDoor, and Trustleaf. They would assist you in documentation, payment tracking, customer service, and year-end statements and make the complete process transparent.
- Get in touch with merchant advisors – When a funding source refuses to give you loan due to bad credit, you loan without a good credit score. They believe in your business and your performance. The biggest advantage is that you need not offer any kind of collateral. They have minimum credit checks and a smooth repayment process.
- Use your credit cards – If you have huge unused limits on your credit cards, you can use it all towards your business. This will be the cheapest financing available for a start-up company. Indirectly, your credit history will not be questioned.
- Borrow against Life Insurance – Not many people know that if you own a life insurance policy, you can borrow money against the cash value almost up to 90 per cent. It is a good idea to speak to your accountant before you go for borrowing against life insurance.
- Crowdfunding – People with bad credit generally approach crowdfunding platforms such as the Kickstarter that helps you to fund your business. You can launch a Kickstarter campaign and allow customers to buy something even before it is made. Indirectly, you would make customers fund your business. Once you have the required money, you can offer your promised product to your customers.
- Separate your personal credit from business credit – No bank will ever lend you money if you have a bad personal credit. So, the first thing that can be done here is to separate your personal credit from your business credit. Once that is done, you will have a Tax ID number and a legal entity. You then become qualified for small credit .
- Approach web-based lenders – There are quite a few non-bank lenders who offer small loans even to those suffering from a poor credit. They are usually in the range of $5,000 to $25,000. Make sure you do a thorough research online, compare interest rates and choose the best suiting your demands.
Choosing a wrong type of business loan for your company can slow down its growth and progress prospects. That is why the first important step is to find a lender who accepts your credit history and is still willing to support your business. Explore your options and get started today despite of a bad credit.