Starting a new business can be a bit daunting. A great many costs are involved with the setup, launch, and early operational period. Very few new entrepreneurs have the means to pay the costs associated with starting up a small business in cash. Mercifully, loan deals exist to support startup businesses.
What about those persons with bad credit? Are they locked out of the startup world? Good news exists for those with troubled credit scores. Bad credit loans for startup businesses do exist.
One issue that would-be borrowers must navigate is the dark cloud of risk. Small businesses are never guaranteed to succeed. So, whether the borrower has good credit or bad credit, the lender is going to see a small business venture as being risky.
While banks and credit unions might not be completely welcoming to a small business borrower, there are other places to turn. In some instances, there may not even be a need to work with a financial institution at all.
Low Borrowing Thresholds
When the amount of money needed to launch the small business is relatively small, financing through credit cards is a viable option. Bad credit card accounts could be sought by those with less-than-desirable scores. Some may choose to simply take a small loan from friends or family.
Peer-to-peer lending is possible as well. A small loan could be taken out from one of these services. Granted, the amount of the interest on the loan is sure to be high. Regardless, those who options for borrowing are slim may find the high interest is an acceptable tradeoff.
Not all business endeavors are ones that can be financed with small amounts of cash. Those who need a substantial loan amount to be approved may wonder whether or not they can make their entrepreneurial dreams come true. There are strategies available to explore.
The Small Business Administration
The Small Business Administration (SBA) does offer loans to those interested in launching a startup. Up to $50,000 may be issued on a loan under the 7(a) loan program. These loans do require collateral, which may be a stumbling block for some. Approval is not guaranteed and the application process is long and involved. Still, this information should not discourage anyone. It never hurts to apply.
Another option would be to seek loans from microlenders and nonprofits. There are scores of these lenders. Seeking them out would be time well spent. These lenders often seek to help minority applicants. Additionally, the types of lenders may be focused on lending money to those located in an economically disadvantaged area.
Microlenders and nonprofit lenders are somewhat overlooked. This is quite unfortunate since both can be a great source of funding for a would-be borrower. For those with bad credit and limited places to turn, these two lenders might be a fantastic help.
The Crowdfunding Matter
Crowdfunding has grown immensely in popularity. A number of high-profile projects have been funded thanks to online money-raising campaigns. Crowdfunding entails asking for donations. People who are willing to help may very well donate money for the launch of a small business.
Simply opening up an account and placing a listing on a crowdfunding site probably won’t be enough to earn a decent amount of money. The campaign needs to be advertised and promoted. Donors likely require a compelling reason to put money into the venture.
Crowdfunding is easy in some ways and difficult in others. Crowdfunding still remains a viable lending/fundraising strategy worth engaging in.
No one should assume that an entrepreneur is limited to one option. Taking out a nonprofit loan, crowdfunding, and using credit cards is possible. Beware of becoming too indebted when launching the business. The money does have to be repaid. Borrowing too much — beyond the ability of the small business’ actual cash flow — could lead to insolvency.
Bad Credit and Hurdles
Yes, bad credit can create hurdles for borrowers that wish they could access small business loans. The situation ma not be as tragic as assumed. Paths for bad credit borrowers do exist.