Just because you have bad credit, doesn’t mean securing startup capital loans is out of the question. And you don’t have to be creative either. There are many places where you can take out a loan to fund the business of your dreams.
Just because you’re starting a new business, doesn’t mean that you’re necessarily seen as a big risk to some lenders. Check out these three options to help you get approved for a loan.
Ask Friends and Family
Ok, this one isn’t technically a financial institution, but it’s one of the more common ways to get financing for a business. If you have bad credit and the people are you are aware of it, then you’ll have to find ways to convince them you’re trustworthy enough.
Besides, if you don’t pay that person back, you’re risking financial ruin as well as the loss of a close relationship, so think carefully before you proceed.
If you do decide to go down this route, make sure whoever you borrow money from understands your plans for your business and the risks involved. Also, make sure you to file necessary paperwork and treat this as an actual loan, much like one from a bank.
Use Credit Cards
Depending on whether or not you’re comfortable with paying relatively high interest rates, you could opt for getting funds for your business with credit cards. If you have bad credit you may be stuck with secured credit cards, which may have even higher fees.
Also, make sure you’re aware of how much you’re paying back and carefully calculate the risks. If not, you may catch yourself owing more than you initially thought and your business could go belly up.
Get a Personal Loan
If you don’t need a large amount of money, you can get financing via personal loans, many of them online. Again, just be aware that some of the lenders may charge high interest rates much like credit cards.
To put things into perspective, some lenders are willing to accept less than stellar credit scores, but you also face a 30% APR, which is usually much higher than credit cards. Therefore, if you really can’t get a loan from other means, only consider this as a last resort.
Get a SBA Loan
Getting a loan from the Small Business Administration might be a good idea.They have a microloan program that gives up to $50,000 for small businesses. The average is typically about $13,000. Check with your state to see who to contact about this type of loan.
If you need more than that, then you might have to go through their flagship 7(a) loan program. However, this loan is usually difficult to obtain. The ones that typically get approved for the 7(a) loan are ones that are able to provide collateral (such as hard assets) so they can seize those if you default on your loan. Aside from that, the approval process can take months even if you qualify.
Getting approved for startup capital loans even if you have bad credit shouldn’t be difficult. Just make sure to do your due diligence, assess your options and understand what you’re getting into before taking out a loan.