Starting a business without money and on a bad credit profile is a desire many seek to achieve.
However, the act of actualizing such a goal seems unattainable for a lot of people due to limited knowledge on how to proceed. It’s even more difficult for those with bad credit as they tend to believe their financial predicament is impossible to overcome.
The good news is; starting a business with low capital or even no money and bad credit is possible and achievable. You only need the guidance necessary to proceed.
This article does just that.
Join us as we discuss the basics of starting your own business even when conditions seem less than ideal.
I have a Poor Credit History; Is it Possible to Start a Business?
Bad credit rating or scores have been among the many issues prospective business owners face when seeking to actualize their goal or bring it to fruition.
While this is true, the good news is that there are ways to overcome such hurdles.
Why is your credit history important?
It is because most lenders would want to know if you’re credit-worthy or not. Creditworthiness enables businesses to access necessary funding to launch their operations.
Having No Money Aggravates the Situation But…
It isn’t uncommon to find entrepreneurs with sound business ideas, but lacking the financing necessary to establish their operations. This makes actualization even more difficult.
However, that doesn’t preclude your chances of realizing your objective.
In other words, it’s possible for someone with a bad credit history and no money to start a successful business. This gives a lot of hope to anyone in such a predicament. The most likely question that might follow is “how?”
You only need to read on to the end for comprehensive details.
Poor Business Credit Vs Bad Personal Credit For Startups
Bad credit can be seen from different angles. It depends on the type of business you wish to start. Certain types of businesses require lenders to take a look at your personal credit history or those of partners/directors.
For others, the financial history of the business is considered.
So, what type of business do you operate? In terms of small-scale businesses, there are basically three kinds; sole traders, startups, and small businesses.
Let’s have a look at each to fully understand how bad credit affects them.
If you’re a sole trader or wish to launch your business operations as a sole trader, then you should expect scrutiny of your personal credit history.
This is especially true for a business that isn’t in existence yet. Your personal credit history is being considered with the aim of finding out if you qualify for a line of credit.
For startups, it’s a bit different. This is because lenders focus on the creditworthiness of persons owning and running the business.
For instance, the creditworthiness of the partners and directors is being considered.
For small businesses, most lenders will consider reviewing the financial history of such businesses.
Areas focused on include the business’ financial history, credit card payments, prior loan agreements as well as defaults.
More importantly, the focus lies on its current financial viability.
You Can Start A Business Without Funds Regardless
While a bad credit rating coupled with having little to no funds available may be daunting, realizing your objective of starting your business is possible. How so?
First off, you can begin by building your credit rating up.
Secondly, you’ll have to demonstrate the soundness and viability of your business idea to have a real shot at realizing your objective.
We’ll need to discuss how to carry out each of these actions to help with better understanding and implementation.
Building your Credit Rating
Creditworthiness is crucial to any business venture.
There are no shortcuts when it comes to having a great credit rating. When taking a look at your creditworthiness, things such as your mortgages, prior loan arrangements, credit cards as well as overdrafts are being considered.
Also, as the main credit representative for your business, your credit score might be assessed. To overcome bad credit, you’ll need to build it up fast. This requires the right effort and time.
The quickest ways to build your bad credit include paying bills on time and making frequent payments.
Other methods of building credit fast include asking for higher credit limits, disputing credit report errors, and becoming an authorized user.
To become an authorized user will require requesting a friend or family member with responsible credit card use. Also, you’ll need to use a secured credit card, and also keep your credit card open.
How Viable Is Your Business Idea?
The viability of your business idea is better demonstrated by the quality of your plan.
Here, the focus is more about showing what a great plan you have. Asides from having a solid business plan, you’ll need to establish a cordial relationship with your bank.
This should precede any applications for loans.
Also, consider taking out the company credit card. With this, steadily build a good credit history. For this to be possible, your bills will have to be paid in full and on time.
Approach Crowdfunding Sites
Social lending has become a growing trend in the world of finance. Tons of crowdfunding platforms have emerged that offer lines of credit to small businesses.
Here, access to funding tends to be less stringent.
Some of the most popular social lending sites include Lending Club, Micro Ventures, YouCaring, Kiva, Funding Circle, Start Some Good LLC, and Seedrs. Others include Undiegogo, Fundly, RocketHub, Patreon, Crowdrise, and SeedInvest.
These are just a few of several ways to float your business even without money.
For access to such loans, you may need to show profit and loss statements, business plans, financial projections, personal credit reports, and customer reviews.
Also, previous tax returns may be demanded in addition to monthly sales reports.
Consider Accessing Government and Private Grants
In a bid to create more jobs, government grants for small businesses have seen a steady rise in recent years. SBA loans and grants are the way to go.
You may want to research for such and apply for those you qualify for.
There you have it. Starting a business with no money is very much achievable. However, it’s necessary to note that you face a greater challenge getting such loans.